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Speaker 1: Coogie. Welcome back, mate, for our last podcast on the

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Speaker 1: economy and interest rates and all those wonderful things before

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Speaker 1: the year ends of twenty twenty four, and yet again

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Speaker 1: not another interest rate reduction insight. What do you reckon?

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Speaker 2: Not inside today? Mark? And yeah, hopefully it's a happy

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Speaker 2: new year in twenty twenty five, but sort of looking

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Speaker 2: at twenty twenty four, the RBA do not want a

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Speaker 2: cut rates. They haven't even though a lot of other

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Speaker 2: central banks have trimmed, including earlier this week the rbn

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Speaker 2: Z our friends in New Zealand cut another fifties. They've

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Speaker 2: got one hundred and twenty five. The fan's going to

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Speaker 2: cut again in December. And you know that discussion that

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Speaker 2: we've had in the past about the Europeans, Canadians, you know,

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Speaker 2: just about everyone in the G seven or G ten

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Speaker 2: countries of cutting rates except us. The RBA are still

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Speaker 2: not convinced that they're underlying or trimmed inflation measure. Headline

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Speaker 2: inflation is great two point one percent, we got the

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Speaker 2: number earlier this week. But the underlying inflation, so taking

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Speaker 2: out the prices that are distorted by the government. The

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Speaker 2: electricity subsidy is the top tier one at the minute,

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Speaker 2: which lowered electricity prices by close to thirty percent. When

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Speaker 2: we look when the Reserve Bank look at the underlying inflation,

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Speaker 2: what's actually happening to the things that supply and demand

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Speaker 2: are actually causing to prices, not government subsidies. It's still

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Speaker 2: three and a quarter three and a half percent, depending

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Speaker 2: which month you look at.

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Speaker 1: So that's interesting because you mentioned that the rest of

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Speaker 1: the world is reducing rates. Do they look at headline

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Speaker 1: inflation or do they look at underlying inflation.

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Speaker 2: Like ours? They look The US has the personal consumption

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Speaker 2: deflator in core terms, which takes out shelter, which is

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Speaker 2: housing an energy, but they include everything else and whether

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Speaker 2: there's a government tax change, it's included in this. In

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Speaker 2: this x Shelder and Energy Bank of England, European Central Bank,

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Speaker 2: they have their own subtly different measures. And yes, of

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Speaker 2: course we need to know why inflation is going up

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Speaker 2: all down and is it in the control of the

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Speaker 2: Reserve Bank of Australia or the European Central Bank or

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Speaker 2: the Bank of England. That's really important. If it's a

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Speaker 2: one month petrol shock, you're not going to change rates,

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Speaker 2: you know, that's absolutely fair enough. But the other central

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Speaker 2: banks has sort of got a target for inflation which

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Speaker 2: is a little bit different to the Australia one. It's

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Speaker 2: usually a little bit lower.

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Speaker 1: It's two.

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Speaker 2: To three two. We're two to three. So and Michelle Bullock,

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Speaker 2: our RBA governor, has said this time and time and

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Speaker 2: time again, they're aimly for the midpoint of that r

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Speaker 2: two point five.

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Speaker 1: So we're slightly half.

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Speaker 2: A percent doesn't sound much, but when you've got inflation,

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Speaker 2: it's actually quite.

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Speaker 1: A lot of As a percentage of two and a

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Speaker 1: half percent, it's yeah, it's it's it's it's one fifth.

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Speaker 1: So it's the different. So that's a big deal. If

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Speaker 1: we could just talk about the I think we just

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Speaker 1: should tver this off maybe a little bit more deeply.

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Speaker 1: The headline rate, which is what the Austrain Bureau Statistics

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Speaker 1: released this week for the monthly read. Then we get

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Speaker 1: a quarterly reading, we get an annual read as well.

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Speaker 1: But it came out at two point one. It sounded fantastic, right,

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Speaker 1: sounds great. Yes, it sounds fantastic, But that just explained

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Speaker 1: the context of that relative to the RBA. So the

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Speaker 1: RBA correct me I'm wrong here is they're looking for

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Speaker 1: a sustainable inflation rate at the levels they want. So

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Speaker 1: sustainable means what is it near term, medium term, long term?

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Speaker 1: Maybe you could give us some a view on that.

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Speaker 1: And is the reason they use a trim me. In

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Speaker 1: other words, they start taking a few bits and pieces

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Speaker 1: there because that allows them to get a better confidence

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Speaker 1: level at the sustainability because I give let's say Liberals

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Speaker 1: win in the next fection, coalition wins and they say,

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Speaker 1: you know that electricity thing that we've been you know,

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Speaker 1: the labor party has been given around seventy five dollars

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Speaker 1: a quarter for the last couple of years, we're getting

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Speaker 1: rid of it. Is that what the Reserve Bank's worried.

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Speaker 2: About have an impact on inflation? On headline inflation?

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Speaker 1: Yes, is that what you're worried about?

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Speaker 2: So yes. So to take a step back, the Reserve

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Speaker 2: Bank want to reduce the volatility in the economy. They

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Speaker 2: went on to hike one week and cut the next

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Speaker 2: and hike again. You know, they want to do the

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Speaker 2: right thing so that there's an element of confidence in

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Speaker 2: the business sector and the household sector. Yeah, we know

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Speaker 2: they've started a cutting cycle and the hiking cycle. You know,

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Speaker 2: you can sort of get a bit of a feel

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Speaker 2: for what's going on, and that's important for them. I

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Speaker 2: think it's an important objective. Yes, So they want to

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Speaker 2: be sure that when they do move rates, so we're

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Speaker 2: talking about rate cuts and sometime maybe they want to

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Speaker 2: be sure that that inflation, as you said, that lovely

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Speaker 2: headline figure of two point one percent annual inflation isn't

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Speaker 2: going to be lost in the months ahead when say,

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Speaker 2: for example, the electricity subsidy is ended, if there's a

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Speaker 2: change of government, even the current comment might do it,

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Speaker 2: or there's something happens in the Middle East with the

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Speaker 2: oil because the other big thing that petrol saw the

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Speaker 2: headline figure drop was petrol prices dropped. I think it

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Speaker 2: was thirteen percent over the years, so that took off

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Speaker 2: another couple of tenths of a percent. So there's a

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Speaker 2: couple of things there that if the RBA had the

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Speaker 2: hand on their heart and said, well will that continue? Well,

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Speaker 2: on the electricity one very probably not. It can't continue

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Speaker 2: forever because it's expensive. It's expensive, and you know it's

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Speaker 2: it's not part of the inflation targeting. And the oil prices.

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Speaker 2: We know anybody who's filled up the anytime the last

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Speaker 2: one usually paid between two dollars thirty or forty a

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Speaker 2: leader and a dollar sixty or something I saw the

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Speaker 2: other day. So that's a huge change. It feeds into

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Speaker 2: the inflation rate. Yes, but the ABA likes to sort

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Speaker 2: of move away from those things because they could easily

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Speaker 2: unwind the other way. And they've just taken the decision

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Speaker 2: to cut rates. Oh my god, you know the electricity

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Speaker 2: subsidies disappearing, change of government whatever, the next election. Oh,

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Speaker 2: the oil price has just jumped up and the petrol

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Speaker 2: price is two dollars twenty a leader again because of

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Speaker 2: something happening. Headline inflation goes back to three and a

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Speaker 2: half or three and three quarter percent, and think, oh god,

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Speaker 2: we've cut rates and we shouldn't have. That's why they

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Speaker 2: trim out volatile items. And there's been examples in the

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Speaker 2: past too. Mark you remember the floods in this more

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Speaker 2: where the fruit and veggie growers are. Remember let us

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Speaker 2: as ten bucks. Let us know that caused the CPI

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Speaker 2: to go up. Oh when there was cyclone Yasi. I

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Speaker 2: think in Queens banana prices went up to fifteen bucks

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Speaker 2: a kilo. It has an impact on inflation. Now you're

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Speaker 2: not gonna have the RBA hiking rates because lettuce and

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Speaker 2: banana prizes got because in a few months time the

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Speaker 2: letterss go back. They dropped to three dollars a lettuce

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Speaker 2: and the bananas came back to three backs of kilo.

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Speaker 2: And so they say they what they call they look

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Speaker 2: through or abstract from those and I think that's what

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Speaker 2: they're doing right now with the electricity and some of

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Speaker 2: the other little things like the Queensland state government the state.

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Speaker 1: Election there thousand bucks, yeah, a.

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Speaker 2: Thousand bucks and fifty cent transport fairs, you know, trimmed

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Speaker 2: off a little bit of that headline inflation rate.

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Speaker 1: So what does the mandate say?

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Speaker 2: Though?

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Speaker 1: What are they mandated to do? In a legislation point

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Speaker 1: of view?

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Speaker 2: That is a really telling question. It's something that I've

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Speaker 2: got a bit of a bee in my bottom about it.

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Speaker 1: But look, we'll fess up. Come on.

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Speaker 2: They in late twenty twenty three, when shortly after Michelle

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Speaker 2: Bullock was appointed as RBA governor, and that was only

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Speaker 2: shortly after you know, Jim Charms became treasured roughly a

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Speaker 2: year after a bit more than that. Whenever there's a

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Speaker 2: new treasure or a new RBA governor, This is part

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Speaker 2: of Peter Cassello's reforms from the mid nineteen nineties. That

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Speaker 2: you have a statement on the conduct of monetary policy.

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Speaker 2: It's usually pretty normal, but we want to keep the

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Speaker 2: prosperity of Australians high, we want to sort of make

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Speaker 2: sure that unemployment doesn't get too high, and always since

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Speaker 2: the mid nineties, inflation between two and three percent. So

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Speaker 2: that's where that's put in writing, chipped into the sort

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Speaker 2: of stone of writing. Now your question about what is

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Speaker 2: the mandate? This is what they said. This is why

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Speaker 2: I've got to be in my bottom I look through

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Speaker 2: that and there is no reference in the letter or

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Speaker 2: this statement of the conduct of monetary policy that Michelle

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Speaker 2: Bullock and Jim Chalmers agreed to that has trimmed mean

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Speaker 2: or underlying or core inflation. It is just the annual

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Speaker 2: change in the consumer price index, the headline figure, and

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Speaker 2: that's what's in the mandate.

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Speaker 1: So as Michelle Bullock taken a little bit of license

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Speaker 1: on this or do which you do it in consultation

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Speaker 1: with the treasure, because I mean the treasure wouldn't be

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Speaker 1: happy with it, because the treasure would like two point

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Speaker 1: one as being in a reflection of how well he's

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Speaker 1: managing the economy.

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Speaker 2: He and he would love a rate cut too. Well,

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Speaker 2: that's that's the whole point, and that that whole issue

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Speaker 2: of the politics at the moment, which you know is

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Speaker 2: a separate issue, well partly a separate issue. But look,

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Speaker 2: I think at the end of the day, the Treasurer

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Speaker 2: would would would agree that you know, he can he

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Speaker 2: can see that there are temporary fact possibly temporary factors

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Speaker 2: in this number. As a result, back put in the

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Speaker 2: minutes which came out of last week last Thursday last week,

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Speaker 2: they said they want more than one quarter of low

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Speaker 2: inflation to confirm that we've broken the back of inflation.

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Speaker 2: So we've sort of had.

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Speaker 1: What do you mean, do you mean trim trim mean inflation.

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Speaker 2: Inflation? Right? I think it's I think the implication was

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Speaker 2: trimmed mean Just so.

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Speaker 1: Just on that because I soon record there might have

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Speaker 1: been one or two statements back but Michelle Bullock when

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Speaker 1: the inflation numbers were getting quite the headline inflation was

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Speaker 1: getting quite low. I do recall reading that she said that, Well,

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Speaker 1: she made some remark either in the video conference call

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Speaker 1: or alternatively in her statement that they will be making

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Speaker 1: adjustments for let's call it government policy. She didn't use

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Speaker 1: those words and the indicator and it was and it

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Speaker 1: was written up by all the journals that the commentators

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Speaker 1: were harder on it. Would she have discussed that with

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Speaker 1: the treasurer? Do you think does it work?

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Speaker 2: They do talk and so they should and I think

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Speaker 2: every RBA government treasurer for yoks have spoken to each

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Speaker 2: other and there's no there's nothing sinister in that. I'm

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Speaker 2: sure that Peter Casso spoke to Ian McFarland and Glenn

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Speaker 2: Stevens and yeah, that's it's important that they sort of

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Speaker 2: know what each other's doing. There's nothing wrong with that.

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Speaker 2: On this particular Shu, I'm I'm sure they would have

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Speaker 2: discussed it. I'm sure there would have been some correspondence

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Speaker 2: and discussion to that effect. That's why Jim Chalmers hasn't

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Speaker 2: been critical of the RBA. All he said is we've

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Speaker 2: got a headline inflation lower hooray, you know, politically and

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Speaker 2: even economically to an extent. But he has not added

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Speaker 2: one word of criticism of the RBA in this whole cycle.

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Speaker 2: So in that to that extent, I think that there's

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Speaker 2: been this discussion about Okay, great that headline inflation is falling,

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Speaker 2: but we need to see that trimmed mean underlying whatever

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Speaker 2: you want to call it, inflation rate back in the

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Speaker 2: or heading back towards the two to three, and definitely

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Speaker 2: heading back to the two to three, not just a

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Speaker 2: blip blarer and then it jumps up next quarter.

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Speaker 1: So you saw the numbers that come out this week.

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Speaker 1: So what surprised you in the various categories of the

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Speaker 1: CPI number? Inflation number? What surprised you in the ups

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Speaker 1: and downs?

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Speaker 2: Yeah, look the things that are going up. We may

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Speaker 2: as well start with a bad news verse. No, real

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Speaker 2: well dwelling rents came off a little bit, but that

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Speaker 2: was because of a rent subsidy, So without them, rents

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Speaker 2: are still running about six and a half percent. Education

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Speaker 2: costs are still running about five and a half percent.

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Speaker 2: This is in annual terms, so still very strong. That's

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Speaker 2: private school fees and these sorts of things. Insurance still

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Speaker 2: going up five six seven percent, very very high. We

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Speaker 2: know the reasons for that. The cost of insurance and

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Speaker 2: the changes are going on in the in the insurance

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Speaker 2: industry are very expensive. And tobacco, which is a health

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Speaker 2: issue where there's huge indexation of tobacco taxas, so I

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Speaker 2: think tobacco is up thirteen percent. So they're the things

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Speaker 2: that went up a lot, and some of those are

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Speaker 2: government policy, by the way, too, so we should trim

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Speaker 2: them out of the inflation rate, which they do, which

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Speaker 2: they did, just by the way. Things that were weak, well,

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Speaker 2: we mentioned electricity down close to thirty percent year on.

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Speaker 1: Year only because of the rebate, pas only.

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Speaker 2: Because of the rebate. Without the rebate, I think someone

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Speaker 2: calculated to be up about three or four percent, So

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Speaker 2: the rebates had a big impact there.

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Speaker 1: But things like that had a negative outcome, So am

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Speaker 1: like a minus minus spell yes, yes, yeah.

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Speaker 2: The deflation in that economist language. We also had prices

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Speaker 2: that were weak or falling in things like meat and seafood.

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Speaker 2: So meat prices are love, if you believe it or not.

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Speaker 2: Things like clothing prices are coming down because again that's

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Speaker 2: a discretionary item. With the economy being pretty sobjured, consumers

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Speaker 2: under pressure. I don't really need to buy that new

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Speaker 2: shirt or that new dress, or there's fancy new shoes.

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Speaker 2: I'll hold off. So the price of those things is

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Speaker 2: also coming down. The other thing that's shot up, and

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Speaker 2: I think this is a bit seasonal because these were

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Speaker 2: October numbers. Was holiday travel, so that's coming into summer

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Speaker 2: and school holidays. Everyone's booking their airbnbs and hotels and

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Speaker 2: airfares and all this sort of stuff. A bit shot up,

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Speaker 2: but I think that's more seasonal, and then it'll sort

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Speaker 2: of drop away in January February. But when you add

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Speaker 2: it all up, they're even excluding and when you excluded

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Speaker 2: the big negatives on petrol as we mentioned before, and

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Speaker 2: rent and the rent substy and the electricity prices, you've

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Speaker 2: got the inflation rates still above three percent.

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Speaker 1: So there was a lot of items that did go up.

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Speaker 2: There were items that went up correct a lot, and

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Speaker 2: things are sort of not discretion like insurance. You've got

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Speaker 2: to pay that. If you've got kids, you got to

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Speaker 2: pay your school fee. Yeah, yep. Yeah.

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Speaker 1: So maybe her way of looking at this is sort

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Speaker 1: of fairly sensible in some respects because the only things

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Speaker 1: that really went down are things were there's subsidies.

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Speaker 2: The big falls were subsidies, correct, but a couple like

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Speaker 2: clothing and those things were due to a weak electronic but.

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Speaker 1: Then were discretionary, I mean, yeah, and the other thing.

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Speaker 2: So that means that Mounty policy is working. By the way,

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Speaker 2: so the rain hikes are were and they certainly are.

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Speaker 2: That's good things. So if you sort of dissect the

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Speaker 2: numbers that way, you know, I think the RBA be

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Speaker 2: pleased to see that they've got.

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Speaker 1: Policy is working, but they haven't got the outcome yet,

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Speaker 1: no correct And it looks like to me then that

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Speaker 1: the because it would seem one of the reason perhaps

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Speaker 1: that she looks at the true moon anyway, is because

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Speaker 1: those things that came back quite significantly, for example.

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Speaker 2: Holidays when back back politics.

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Speaker 1: So for example, like electricity, the issue with those is

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Speaker 1: that they are heavily weighted in the calculation of the

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Speaker 1: CPI because everybody uses electricity, correct, it's not not everybody

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Speaker 1: buys a shirt.

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Speaker 2: That clothing doesn't have a very high weight, doesn't.

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Speaker 1: Have high weight.

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Speaker 2: It's been much more on food and those are the

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Speaker 2: things petrol. Petrol's got housing and dwelling. You know, it's

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Speaker 2: a high proportion of your income is allocated to those things.

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Speaker 1: And therefore they put a heavier weighting correct on those reductions.

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Speaker 1: Even though it's only seventy five dollars a quarter, it's

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Speaker 1: only turn dollars a year for each individual. Let's take

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Speaker 1: coins lane out of it for the moment, but it's

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Speaker 1: a couple of hundred bucks per person. Eight affects every person.

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Speaker 2: Everyone got it.

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Speaker 1: Every single person got it from General Ian Hart to

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Speaker 1: you know an eight year old kids live an hour

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Speaker 1: on his own.

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Speaker 2: Yep.

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Speaker 1: And because everyone got it has a heavy weighting. Therefore,

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Speaker 1: when you add all these two hundred dollars up by

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Speaker 1: every person in the every person living in the population

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Speaker 1: in Australia that is over eight years of age, then

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Speaker 1: it actually has a big effect on the CPI.

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Speaker 2: Calculation, consumption and the weight. Again, unlike tobacco, in the

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Speaker 2: tobacco prices went up, only what ten percent of the

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Speaker 2: population smoke, So you know, you know it's got a well,

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Speaker 2: it's got a relatively small weight because it's not a

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Speaker 2: major household expenditure item. So therefore, if we looked at

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Speaker 2: most of the people don't smoke, which is a good thing.

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Speaker 1: So when we look at the cost of living, then

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Speaker 1: we are looking at the cost of living. Look, you know,

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Speaker 1: I would expect we are looking and she's looking at

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Speaker 1: the cost of living for the majority of the population. Yes,

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Speaker 1: so has the cost of living for the majority of

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Speaker 1: the population only grown by two point one percent, or

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Speaker 1: has the cost of living for the majority of the

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Speaker 1: population grown by three point five percent, which is the

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Speaker 1: drimnin which there is no way she wants.

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Speaker 2: Yeah, the good news is that, yes, we are saving

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Speaker 2: seventy five bucks a quarter on electricity. It is it

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Speaker 2: is a cost of living reliefs. You know, your bill

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Speaker 2: comes in, Oh, there's seventy five bucks off that. That's great,

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Speaker 2: Thank you very much. Good good news. So it is

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Speaker 2: a it is a real saving. Filled up my car

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Speaker 2: got it only cost me eighty bucks filled up, you

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Speaker 2: know six months ago it cost me one hundred and

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Speaker 2: ten bucks to Yeah, you can sort of see those

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Speaker 2: sorts of things coming through. But then off setting that, oh,

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Speaker 2: my insurance bill came up, Oh my god, scoffies came up,

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Speaker 2: Oh my god. Yeah, all those things which are really high.

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Speaker 2: The Milando's whacked it up another fifty bucks.

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Speaker 1: I'm not renting it. I've got a mortgage. My mortgage.

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Speaker 2: You've got to go.

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Speaker 1: I know that's not included.

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Speaker 2: It's not included, but you can, yes, has gone up correct, correct, correct, correct,

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Speaker 2: And you can sort of see those things coming through

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Speaker 2: in the day. There So this is why if we

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Speaker 2: cut some slack for the poor old RBA, particularly when

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Speaker 2: you note, well, you know the Straits are at the peak.

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Speaker 2: You know, it's just a question of when how much

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Speaker 2: they cut on these sort of things when the rest

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Speaker 2: of the world's cutting. So their dilemma, and it is

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Speaker 2: a dilemma. I would say, yeah, I'm sure they would

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Speaker 2: love to come on a session to come. We can ask,

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Speaker 2: We can ask Andrew hows right, the Deputy Government. He's

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Speaker 2: a very chatty get mine.

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Speaker 1: If we can.

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Speaker 2: Leave it with me, you leave it me. I'll have

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Speaker 2: a chat for the earlier in the new year. I

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Speaker 2: think there's a blackout, like ten days before a board meeting.

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Speaker 1: Having having day after the week after, I'm sure you

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Speaker 1: will talk about.

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Speaker 2: This market away. We'll have another chat Andrew. If you're

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Speaker 2: watching well, I'm.

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Speaker 1: Sure I heard he watches us.

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Speaker 2: Yep.

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Speaker 1: This is one of the most popular economic updates in

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Speaker 1: the country.

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Speaker 2: It is just it's great And by the way, can

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Speaker 2: I just can we just take a small tangent there.

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Speaker 2: A couple of months ago, I had a holiday. I

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Speaker 2: saw my son over in Italy. This is not a

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Speaker 2: brag or anything. We caught up in Italy walking down

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Speaker 2: the streets of Florence, sort of just going to the

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Speaker 2: Hey girks, here you going, Yeah, who are you? This

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Speaker 2: is Florence and Italy. Oh, I love your podcast with

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Speaker 2: Mark Boris. You know, I love it. And we sat

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Speaker 2: on the side of this sort of street corner in

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Speaker 2: Florence in thirty five degree heat talking about the economy.

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Speaker 2: It was just a fellow who listened to the podcast

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Speaker 2: and let's by the way, Mark, so I was flatted.

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Speaker 2: I thought it was mate.

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Speaker 1: This is one of the most pop our podcasts by far,

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Speaker 1: yours and mine on this topic by far, probably the

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Speaker 1: most popular. I mean we get some odd ones in

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Speaker 1: the in the straight talk cruisers basis and crazy guests,

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Speaker 1: but generally speaking on a consistent basis, this stuff outperforms

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Speaker 1: most stuff that we do.

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Speaker 2: Oh and this is why I absolutely love it and

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Speaker 2: I love preparing for it. Love sort of thinking, okay,

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Speaker 2: what are we going to talk about? What are the

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Speaker 2: hot topics? And you know, we discuss that sort of stuff.

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Speaker 2: And so getting back to the point too, because I

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Speaker 2: think this is it's really and the reason why I

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Speaker 2: think I love doing these podcasts us with you and

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Speaker 2: you know, the whole discussion is that economics and your

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Speaker 2: personal finances is something that you should know about. You know,

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Speaker 2: it's really important and thankfully many many people do there.

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Speaker 2: You could never learn too much about your finance us every.

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Speaker 1: Day, well because the changes every day too, That's right.

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Speaker 2: You look at the markets, you look at something in

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Speaker 2: the news comes out, Oh, the monthly CPI, what's that mean? Yeah,

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Speaker 2: because that's only been a recent innovation here in Australia

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Speaker 2: and the Reserve Bank of putting out trim output gaps.

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Speaker 2: And you know, so you're learning a lot. And every

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Speaker 2: day tax policy changes, you know, things change that you

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Speaker 2: might have had your best laid plans sorted out. Oh

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Speaker 2: and then it comes a pandemic. Oh god, you know,

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Speaker 2: and that causes ructions in economics, personal finances and the like.

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Speaker 1: And new events, new outcomes, the event things, and no

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Speaker 1: one ever thought of it.

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Speaker 2: And this is where as we're saying, just before that,

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Speaker 2: go back to where we were, we cut the RBA

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Speaker 2: some slack because they haven't seen it either. It's not

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Speaker 2: a criticism. They're mortals. They're human beings out of work,

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Speaker 2: you know. I'm sure they're bloody good economists and they're really,

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Speaker 2: really smart, but they just go to work like you

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Speaker 2: and me, and they sort of see that. I think

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Speaker 2: Michelle Bullock's spoken about it. You know, the price is

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Speaker 2: filling up a car with petrol and she had a haircut.

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Speaker 2: The oh my god, the cost of the haircut's gone up,

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Speaker 2: so good honors. She was sort of down to earth

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Speaker 2: and that's what I really like about her communication skills.

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Speaker 2: But they live it too. They're not just in their

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Speaker 2: ivory tower, to use that cliche. And so when they're

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Speaker 2: sitting there on the more serious matters, and you should

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Speaker 2: we cut interest rates? We meet in a couple of

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Speaker 2: days time or ten days time, what are we going

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Speaker 2: to do? And they get all these wonderfully smart economists

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Speaker 2: crunching these numbers. What's happening to inflation? What's dis government

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Speaker 2: policy related? Oh, what's the world doing? Yeah? What did

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Speaker 2: Why did New Zealand cut another fifty in the federal Reserve?

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Speaker 2: And Trump? What are the tarifsmen? There's a freedom of

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Speaker 2: information request. I don't know who didn't have, but it

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Speaker 2: was only just released in them again in the last

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Speaker 2: few days. Had the RBA done any modeling on Trump

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Speaker 2: tariffs between the US and China? Lo and behold they

436
00:22:04,600 --> 00:22:07,640
Speaker 2: had and so they released this under freedom of information.

437
00:22:07,960 --> 00:22:09,520
Speaker 2: Bloody interesting because they.

438
00:22:09,880 --> 00:22:12,119
Speaker 1: Didn't say because I didn't see that it just I

439
00:22:12,119 --> 00:22:14,520
Speaker 1: did read She said that they didn't have a view

440
00:22:14,560 --> 00:22:15,159
Speaker 1: at this stage.

441
00:22:15,200 --> 00:22:17,240
Speaker 2: They didn't have a view previously, but under this freedom

442
00:22:17,280 --> 00:22:19,240
Speaker 2: of informer, yes they didn't. Initially she was sort of

443
00:22:19,640 --> 00:22:21,960
Speaker 2: ho hum about it, hush hush. But there's thing, and

444
00:22:22,240 --> 00:22:24,560
Speaker 2: it wasn't in huge details, only like a couple of

445
00:22:24,560 --> 00:22:27,680
Speaker 2: paragraphs in a sort of a briefing note in internal

446
00:22:27,720 --> 00:22:30,480
Speaker 2: briefing note, not for public well, in theory, not for

447
00:22:30,520 --> 00:22:35,080
Speaker 2: public viewing. But it said it's negative for global trade needing,

448
00:22:35,200 --> 00:22:38,800
Speaker 2: meaning what trade will slow down, exports and imports will decline.

449
00:22:38,960 --> 00:22:42,480
Speaker 2: Growth yep, growth will slow down because of these tariffs.

450
00:22:42,920 --> 00:22:47,800
Speaker 2: They said. Australia probably won't be directly affected. But and

451
00:22:47,840 --> 00:22:50,960
Speaker 2: this is a really important but because of our export

452
00:22:51,000 --> 00:22:52,960
Speaker 2: dependence on China, who take a third of all of

453
00:22:52,960 --> 00:22:56,439
Speaker 2: our exports, if the Chinese economy slows down, demand for

454
00:22:56,480 --> 00:22:59,320
Speaker 2: iron ore and coal and all this other stuff declines,

455
00:22:59,480 --> 00:23:01,199
Speaker 2: we have a hit to our national income. And the

456
00:23:01,240 --> 00:23:04,760
Speaker 2: conclusion was, and of course this is if there is

457
00:23:04,800 --> 00:23:10,160
Speaker 2: I can't remember the terminology, like a severe trade war tariffs,

458
00:23:10,200 --> 00:23:14,080
Speaker 2: you know, the Chinese retaliate and the Americans Hight Canadians

459
00:23:14,119 --> 00:23:16,800
Speaker 2: are on board too. Yep. If that happens, it is

460
00:23:16,840 --> 00:23:19,000
Speaker 2: negative for the Australian economy because we are still a

461
00:23:19,040 --> 00:23:23,400
Speaker 2: big exporter, particularly to China. We have weaker bottom line

462
00:23:23,440 --> 00:23:27,800
Speaker 2: GDP growth and in time again lags. We've discussed those

463
00:23:27,840 --> 00:23:33,200
Speaker 2: in previous podcasts. We have a lower inflation rate because

464
00:23:33,200 --> 00:23:35,880
Speaker 2: of it at a lower.

465
00:23:35,680 --> 00:23:37,360
Speaker 1: Dollar, sort of a good thing for us.

466
00:23:38,720 --> 00:23:43,000
Speaker 2: Lower the weaker growth and the export income is the

467
00:23:43,040 --> 00:23:46,200
Speaker 2: thing that takes a hit that causes that lower inflation.

468
00:23:47,880 --> 00:23:49,800
Speaker 2: And that was sort of the conclusion. And I think

469
00:23:49,880 --> 00:23:53,440
Speaker 2: everybody who's done any economics on international trade would agree.

470
00:23:53,440 --> 00:23:55,160
Speaker 2: And yeah, there's a couple of other very smart people.

471
00:23:55,200 --> 00:23:59,320
Speaker 2: Stephen Hamilton from one of the US universities, he was

472
00:23:59,400 --> 00:24:01,159
Speaker 2: sort of on the ra listened to him the other

473
00:24:01,200 --> 00:24:03,080
Speaker 2: day and he's just sort of very simply said, get

474
00:24:03,119 --> 00:24:06,560
Speaker 2: every bit of decent economic analysis on tariffs, bad for

475
00:24:06,600 --> 00:24:09,040
Speaker 2: economic growth, and yet Australa is going to be cool.

476
00:24:09,240 --> 00:24:11,480
Speaker 1: And maybe we should just quickly touch on what happens

477
00:24:11,480 --> 00:24:14,320
Speaker 1: when we have low economic growth here and Astray for example,

478
00:24:14,359 --> 00:24:19,560
Speaker 1: and particularly in relation to weak sports that actually folds

479
00:24:19,560 --> 00:24:23,280
Speaker 1: itself into government collecting less tax because the government has

480
00:24:23,280 --> 00:24:27,920
Speaker 1: been doing, you know, fortunately really well out of the

481
00:24:27,960 --> 00:24:31,680
Speaker 1: big mining companies, like collecting a lot of tax, which

482
00:24:31,680 --> 00:24:37,240
Speaker 1: has been helping our surplus deficit management process. Now, if

483
00:24:37,280 --> 00:24:41,040
Speaker 1: for some reason, our national accounts are lower and we're

484
00:24:41,080 --> 00:24:43,640
Speaker 1: exporting a lot less because China has a lot less

485
00:24:43,640 --> 00:24:47,479
Speaker 1: demand because it's getting less, it can't sell as much

486
00:24:47,520 --> 00:24:49,960
Speaker 1: as it usually sells into Canada and to the United

487
00:24:50,000 --> 00:24:52,879
Speaker 1: States and to other places. And assuming she did say this,

488
00:24:52,920 --> 00:24:55,840
Speaker 1: assuming that China can't find other markets to sell too,

489
00:24:56,080 --> 00:24:59,160
Speaker 1: assuming that for a moment, because by the way, Russia

490
00:24:59,200 --> 00:25:03,040
Speaker 1: and India love buying stuff from China, you know, so

491
00:25:03,600 --> 00:25:05,000
Speaker 1: China might be able to solve it. But it's just

492
00:25:05,000 --> 00:25:07,280
Speaker 1: assuming they can't find it. What it means is that

493
00:25:08,040 --> 00:25:09,479
Speaker 1: we start to get a bit of pressure on our

494
00:25:09,480 --> 00:25:13,640
Speaker 1: own budgets here, correct, Now, does that mean a tax

495
00:25:13,720 --> 00:25:14,520
Speaker 1: hike if let's.

496
00:25:14,320 --> 00:25:18,719
Speaker 2: See bigger deficits with them in a tax hike, If

497
00:25:18,840 --> 00:25:20,960
Speaker 2: the reason is simply that we run a bigger deficit

498
00:25:21,040 --> 00:25:25,040
Speaker 2: because of weaker commodity prices and lower export volumes of

499
00:25:25,440 --> 00:25:28,000
Speaker 2: buyin or and stuff, I think no. I think the

500
00:25:28,000 --> 00:25:30,400
Speaker 2: gunment will just let it slip, and you know, it's

501
00:25:30,400 --> 00:25:33,280
Speaker 2: way for to recatic stabilizers and hopefully the trade wars

502
00:25:33,280 --> 00:25:35,119
Speaker 2: only last six or twelve months and they'll recover a

503
00:25:35,119 --> 00:25:37,439
Speaker 2: little bit like that underlying inflation and discussion of the

504
00:25:37,680 --> 00:25:41,640
Speaker 2: RBA if it becomes entrenched, and then they realize, oh

505
00:25:41,640 --> 00:25:45,000
Speaker 2: my god, you know we've got this ongoing problem. It's

506
00:25:45,000 --> 00:25:48,600
Speaker 2: not just a six month wonder, it's a more entrenched problem.

507
00:25:49,080 --> 00:25:53,520
Speaker 2: And they see that China maybe can't find alternative markets

508
00:25:53,520 --> 00:25:56,239
Speaker 2: because I think Trump as orterious on the Europeans. So

509
00:25:56,280 --> 00:25:59,080
Speaker 2: the Europeans, who are big consumers of Chinese manufactured goods,

510
00:25:59,119 --> 00:26:02,480
Speaker 2: who isn't they might retaliate and you get this absolute

511
00:26:03,280 --> 00:26:06,679
Speaker 2: hell to pay on the trade side. If that happens, now,

512
00:26:06,720 --> 00:26:11,159
Speaker 2: budget deficit goes bigger and bigger and bigger. Yeah, the

513
00:26:12,640 --> 00:26:15,439
Speaker 2: government of the day would be confronting budget deficits that

514
00:26:15,480 --> 00:26:18,040
Speaker 2: are not just you know, sounds like a big number

515
00:26:18,040 --> 00:26:20,800
Speaker 2: of twenty thirty billion, that's okay, it's only one percent

516
00:26:20,840 --> 00:26:25,399
Speaker 2: of GDP. If they start approaching fifty sixty seventy billion, okay,

517
00:26:25,440 --> 00:26:26,640
Speaker 2: you've got a serious issue.

518
00:26:26,960 --> 00:26:29,560
Speaker 1: So can I And I don't know if this is

519
00:26:29,560 --> 00:26:35,160
Speaker 1: true or not, But are there any off balance sheet?

520
00:26:36,040 --> 00:26:39,639
Speaker 1: You probably heard about it, the current dispute, I mean

521
00:26:39,680 --> 00:26:43,159
Speaker 1: the current discussion. Yes, it's in the media anyway, we

522
00:26:43,280 --> 00:26:44,960
Speaker 1: might as well talk about it. But you know, they

523
00:26:45,040 --> 00:26:46,439
Speaker 1: come up and say, well, here's the budget and this

524
00:26:46,480 --> 00:26:47,719
Speaker 1: is what we're going to spend the money on. But

525
00:26:47,760 --> 00:26:50,000
Speaker 1: then they go off and spend money on off budget.

526
00:26:50,680 --> 00:26:51,879
Speaker 1: Can you explain what that's about?

527
00:26:52,080 --> 00:26:56,680
Speaker 2: Okay? The budget that we hear about so often from

528
00:26:56,760 --> 00:27:01,440
Speaker 2: the government is where they raise revene. You so, company tax,

529
00:27:01,480 --> 00:27:05,919
Speaker 2: income tax, GST, a couple of other sources of charging

530
00:27:05,920 --> 00:27:08,679
Speaker 2: for public and all that sort of stuff. That's the

531
00:27:08,680 --> 00:27:10,720
Speaker 2: revenue they collect and at the moment that's about six

532
00:27:10,760 --> 00:27:14,560
Speaker 2: hundred and fifty billion dollars a year or take. With

533
00:27:14,600 --> 00:27:22,200
Speaker 2: that money, they then pay age, pensions, defense expenditure, roads, schooling, healthcare, medicare,

534
00:27:22,480 --> 00:27:26,639
Speaker 2: all that other public servants, all that stuff, you know,

535
00:27:26,920 --> 00:27:31,160
Speaker 2: veterans affairs, and they end up with a budget deficit

536
00:27:31,240 --> 00:27:35,679
Speaker 2: or surplus. And when the economy is booming, they collect

537
00:27:35,680 --> 00:27:38,520
Speaker 2: lots like as you said, from high commodity prices, they

538
00:27:38,520 --> 00:27:41,639
Speaker 2: collect a lot of company tax because the RIO BHP

539
00:27:42,880 --> 00:27:45,840
Speaker 2: General Righthart's business for Broyhill whatever it's called. They make

540
00:27:45,960 --> 00:27:48,680
Speaker 2: so much money they pay tax and the governance is, yeah,

541
00:27:48,680 --> 00:27:51,760
Speaker 2: we've got a good budget position. That's a normal budget.

542
00:27:52,680 --> 00:27:55,800
Speaker 2: There is this off budget stuff which has been around

543
00:27:55,880 --> 00:28:00,439
Speaker 2: for it's not twenty years, it's got you're in the

544
00:28:00,480 --> 00:28:04,560
Speaker 2: last ten years. Both sides have used it where they say,

545
00:28:04,640 --> 00:28:07,000
Speaker 2: for example, the NBN, which of course has been around

546
00:28:07,000 --> 00:28:11,080
Speaker 2: for ten years now whatever, for fifteen years because that

547
00:28:11,240 --> 00:28:13,360
Speaker 2: was capital expenditure, you.

548
00:28:13,280 --> 00:28:15,199
Speaker 1: Know, so it's not day to day stuff.

549
00:28:15,240 --> 00:28:19,200
Speaker 2: It's not day to day expenditure. And even though the

550
00:28:19,680 --> 00:28:23,760
Speaker 2: Labour PARTI says they won't privatize it, not sure whether

551
00:28:23,800 --> 00:28:25,439
Speaker 2: that's a good idea, you know, when it's fully up

552
00:28:25,480 --> 00:28:27,800
Speaker 2: and running it like Telstram, you know they privatize Telstra

553
00:28:27,840 --> 00:28:29,920
Speaker 2: and it was making money. Maybe in the NBN's up

554
00:28:30,359 --> 00:28:32,840
Speaker 2: fully function they can providesse but that's by the bye.

555
00:28:33,320 --> 00:28:36,400
Speaker 2: But all that money, the tens of billions of bucks

556
00:28:36,480 --> 00:28:41,120
Speaker 2: that they spent on you know, the I don't copper

557
00:28:41,160 --> 00:28:43,240
Speaker 2: to the node and all this other stuff building the NBN,

558
00:28:43,360 --> 00:28:45,320
Speaker 2: like bloody good NBN. Good on them. You know, we

559
00:28:45,400 --> 00:28:47,239
Speaker 2: need that sort of stuff. It was not on your

560
00:28:47,280 --> 00:28:48,560
Speaker 2: day to day budget because then it would have a

561
00:28:48,600 --> 00:28:53,640
Speaker 2: horrendous deficit. It is an asset to the government. Whereas

562
00:28:53,880 --> 00:28:57,080
Speaker 2: if they pay an age pensure to someone thousand, that's

563
00:28:57,080 --> 00:29:01,000
Speaker 2: an expense. It's an expense. That's it. If they spend

564
00:29:01,080 --> 00:29:03,240
Speaker 2: one thousand dollars billing in the end, they've got an asset.

565
00:29:04,480 --> 00:29:08,240
Speaker 2: And that's where this housing fund is also going to

566
00:29:08,240 --> 00:29:11,120
Speaker 2: be captured. It'll be off budget, so it won't be

567
00:29:11,160 --> 00:29:14,960
Speaker 2: in the budget. It'll be it's publicly available information. It's

568
00:29:14,960 --> 00:29:17,400
Speaker 2: not secret as such. So just say they spend what

569
00:29:17,520 --> 00:29:22,280
Speaker 2: is ten billion bucks on building houses, they will own

570
00:29:22,320 --> 00:29:26,560
Speaker 2: those houses. They are government assets, and one day I'm

571
00:29:26,560 --> 00:29:30,000
Speaker 2: sure someone will privatize them, you know, like the defense

572
00:29:30,040 --> 00:29:32,080
Speaker 2: housing all those years ago. I think it was been

573
00:29:32,080 --> 00:29:34,560
Speaker 2: the menses government. I might be wrong, so don't quote

574
00:29:34,600 --> 00:29:38,920
Speaker 2: me on it. Specifically when we provided houses for defense

575
00:29:38,960 --> 00:29:41,080
Speaker 2: staff because they moved all around the country and all

576
00:29:41,080 --> 00:29:43,040
Speaker 2: this other stuff. Whatever. Here is a house you can

577
00:29:43,080 --> 00:29:47,320
Speaker 2: live in. It sort of subsidized rent. The Defense Department owned.

578
00:29:47,120 --> 00:29:49,280
Speaker 1: The houses, were then up selling them and then up

579
00:29:49,320 --> 00:29:51,360
Speaker 1: selling a lot of them in the two thousand period.

580
00:29:51,720 --> 00:29:53,720
Speaker 2: Is to get to get the cash in, cash in

581
00:29:53,720 --> 00:29:56,880
Speaker 2: the door. So privatizing, you know, getting rid of them.

582
00:29:56,880 --> 00:29:59,240
Speaker 1: Your assets are so it's a bit like a company.

583
00:29:59,320 --> 00:30:00,960
Speaker 2: And so that wouldn't to be on the budget either.

584
00:30:01,320 --> 00:30:04,240
Speaker 2: The critical thing is if they do sell stuff from

585
00:30:04,280 --> 00:30:07,080
Speaker 2: the off budget side of the account, well.

586
00:30:06,960 --> 00:30:10,640
Speaker 1: It's called it's nearly capitalized expenditure.

587
00:30:11,320 --> 00:30:13,400
Speaker 2: It effectively is There's probably a few other bits and

588
00:30:13,400 --> 00:30:16,080
Speaker 2: bobs associated with it too, but it is an asset.

589
00:30:16,120 --> 00:30:18,520
Speaker 2: And when they're sold, that is off budget too, because

590
00:30:18,640 --> 00:30:21,000
Speaker 2: you can imagine you can't bring they sold if they

591
00:30:21,040 --> 00:30:23,000
Speaker 2: solved the NBN. Oh we've got a budget surplus of

592
00:30:23,000 --> 00:30:23,760
Speaker 2: fifty billion.

593
00:30:25,400 --> 00:30:26,800
Speaker 1: So you can't add that into revenue.

594
00:30:27,040 --> 00:30:29,520
Speaker 2: So no, correct, you don't. So it works both ways.

595
00:30:29,520 --> 00:30:31,959
Speaker 2: But at the moment when we need infrastructure in our productivity.

596
00:30:31,960 --> 00:30:35,560
Speaker 2: We discussed productivity last time, Mark, it's crap. You know,

597
00:30:35,760 --> 00:30:39,160
Speaker 2: our productivity is not good. We need to both the

598
00:30:39,200 --> 00:30:43,880
Speaker 2: government build efficient roads and nbns and all this other stuff. Great,

599
00:30:44,080 --> 00:30:45,640
Speaker 2: we need the private sector to do it as well.

600
00:30:46,360 --> 00:30:48,640
Speaker 2: So in a sense, I want to see capic. I

601
00:30:48,720 --> 00:30:51,120
Speaker 2: like capics, I like business investments. It's the sort of

602
00:30:51,200 --> 00:30:54,760
Speaker 2: underpinning of our whole economy, private and public sector when

603
00:30:54,760 --> 00:30:58,400
Speaker 2: it's done well. So not roads going nowhere or twenty

604
00:30:58,400 --> 00:31:01,800
Speaker 2: billion dollar bloody road train tunnels that carry half a

605
00:31:01,880 --> 00:31:05,680
Speaker 2: dozen people. I want to see proper productivity enhancing cap

606
00:31:05,880 --> 00:31:06,480
Speaker 2: X coming through.

607
00:31:06,600 --> 00:31:09,320
Speaker 1: So it's a bit like corporations. But you know, if

608
00:31:09,320 --> 00:31:11,440
Speaker 1: a corporation has as day to day expenses, it all

609
00:31:11,440 --> 00:31:13,400
Speaker 1: goes in the profit and loss account, but it can

610
00:31:13,480 --> 00:31:16,200
Speaker 1: but if it spends something on building infrastructure, might be

611
00:31:16,240 --> 00:31:18,440
Speaker 1: you know, there might be some capital items that can

612
00:31:18,480 --> 00:31:21,240
Speaker 1: capitalize some of the expenditure. It doesn't go into the

613
00:31:21,280 --> 00:31:24,240
Speaker 1: P and L and it gets carried to on the

614
00:31:24,240 --> 00:31:29,920
Speaker 1: balance it as an asset. But you know, companies like mine,

615
00:31:29,960 --> 00:31:33,600
Speaker 1: we get audered, so we get we get checked the

616
00:31:33,720 --> 00:31:37,080
Speaker 1: orders and say that thing there, that amount of money

617
00:31:37,120 --> 00:31:40,760
Speaker 1: you're carrying for those assets you bought, we want you

618
00:31:40,920 --> 00:31:45,000
Speaker 1: to revalue that down or up. We don't think that

619
00:31:45,120 --> 00:31:48,160
Speaker 1: you should be carrying it for ten million dollars because

620
00:31:48,240 --> 00:31:51,160
Speaker 1: you know, whilst of course we actually can't see how

621
00:31:51,160 --> 00:31:52,560
Speaker 1: you know, earned money out of it, or we can't see

622
00:31:52,600 --> 00:31:54,280
Speaker 1: the relevance of it for the future, we can't see

623
00:31:54,280 --> 00:31:56,560
Speaker 1: the value in the asset. Who does that at the

624
00:31:56,600 --> 00:31:59,400
Speaker 1: government level? Does the order to General check this stuff?

625
00:31:59,680 --> 00:32:03,000
Speaker 2: There are there are checks done periodically, so the value

626
00:32:03,040 --> 00:32:06,320
Speaker 2: of the NBN is the sort of the big ticket

627
00:32:06,320 --> 00:32:10,600
Speaker 2: item at the moment, what's it worth? Who knows a

628
00:32:10,600 --> 00:32:12,680
Speaker 2: lot of money has been invested. It's worth something, it's

629
00:32:12,720 --> 00:32:15,920
Speaker 2: worth something, But is it sort of going to be

630
00:32:15,960 --> 00:32:19,360
Speaker 2: swamped by technology? Still? Is this all? You know? It's

631
00:32:19,400 --> 00:32:21,040
Speaker 2: good for the moment, But in ten years time.

632
00:32:20,920 --> 00:32:23,480
Speaker 1: Will there be a new is the redundant a new thing.

633
00:32:23,360 --> 00:32:26,400
Speaker 2: That just swamped Like telstre It tells you to be mega, mega,

634
00:32:26,440 --> 00:32:29,880
Speaker 2: big company and it's still a good company, but it's

635
00:32:30,240 --> 00:32:33,360
Speaker 2: mickey mouse compared with what it was because NBN came along.

636
00:32:33,400 --> 00:32:35,760
Speaker 2: So will there be a new way that we communicate

637
00:32:35,880 --> 00:32:40,520
Speaker 2: and send I don't teleopathically telepathic whatever. Maybe maybe MUSC

638
00:32:40,520 --> 00:32:41,880
Speaker 2: will have an idea put a chip in your head

639
00:32:41,880 --> 00:32:46,120
Speaker 2: and you can Yeah, but there's something that could happen there.

640
00:32:46,160 --> 00:32:49,080
Speaker 2: So that's what makes as.

641
00:32:49,000 --> 00:32:52,760
Speaker 1: An Australia ciz like your your tax pain dollars going sure?

642
00:32:52,760 --> 00:32:53,680
Speaker 2: Who checks yours?

643
00:32:53,680 --> 00:32:54,600
Speaker 1: Are my dollars going there?

644
00:32:54,600 --> 00:32:56,760
Speaker 2: I'm pretty sure it's valued because again that comes off

645
00:32:57,120 --> 00:33:00,440
Speaker 2: this is the thing on the federal governments ball sheet.

646
00:33:01,240 --> 00:33:03,480
Speaker 2: There's gross debt, which is the amount of bonds they

647
00:33:03,560 --> 00:33:05,840
Speaker 2: issue by the way they have to borrow money to

648
00:33:05,920 --> 00:33:08,400
Speaker 2: buy the stuff that's off the balance sheet too, so

649
00:33:08,440 --> 00:33:11,440
Speaker 2: there is an accounting in the amount of government debt,

650
00:33:12,440 --> 00:33:13,440
Speaker 2: but it's offset by.

651
00:33:13,320 --> 00:33:15,560
Speaker 1: The assets, assuming the ASCID is worth it.

652
00:33:15,640 --> 00:33:17,160
Speaker 2: So the assets are worth something, so there is an

653
00:33:17,160 --> 00:33:19,520
Speaker 2: evaluation done. Reminds me a little bit of the Future

654
00:33:19,520 --> 00:33:26,160
Speaker 2: Fund that is not part of the government's budget, even

655
00:33:26,200 --> 00:33:28,560
Speaker 2: though the money that was put into it was from

656
00:33:28,600 --> 00:33:32,040
Speaker 2: budget surpluses in years gone by, when we particularly the

657
00:33:32,040 --> 00:33:36,440
Speaker 2: Castello period as Treasurer back fifteen twenty years ago or

658
00:33:36,480 --> 00:33:39,040
Speaker 2: whatever that was, when he was running big budget surpluses,

659
00:33:39,080 --> 00:33:41,440
Speaker 2: he put a whole chunk of money into the Future Fund,

660
00:33:42,320 --> 00:33:47,040
Speaker 2: and they've invested it like any asset manager, and they

661
00:33:47,120 --> 00:33:50,880
Speaker 2: retain the earnings, like they don't have to give the

662
00:33:50,920 --> 00:33:53,520
Speaker 2: profits that they make from investing in shares and bonds

663
00:33:53,520 --> 00:33:56,000
Speaker 2: and property and all these other things back to the government.

664
00:33:56,040 --> 00:33:58,640
Speaker 2: They retain them and build up the value of the.

665
00:33:58,120 --> 00:33:59,880
Speaker 1: Future That's fair enough because you can see the.

666
00:34:00,800 --> 00:34:03,040
Speaker 2: And they put out a quarter reports and they got

667
00:34:03,040 --> 00:34:05,560
Speaker 2: lots of stuff you can although they've got some things

668
00:34:05,640 --> 00:34:09,799
Speaker 2: like a lot of roads and utilities that are very

669
00:34:09,800 --> 00:34:12,120
Speaker 2: hard to value, like what's the value of an airport.

670
00:34:13,040 --> 00:34:17,080
Speaker 2: I don't know, you might have paid ten billion, and

671
00:34:17,120 --> 00:34:21,360
Speaker 2: you might market it fifteen because so many more people flying,

672
00:34:21,360 --> 00:34:22,960
Speaker 2: and you can sort of see some cash flows. You

673
00:34:23,160 --> 00:34:25,040
Speaker 2: collect rent for it, you do collect every time of

674
00:34:25,080 --> 00:34:25,760
Speaker 2: playing takes.

675
00:34:26,160 --> 00:34:28,560
Speaker 1: Collecting shops, and you probably can't value it. I mean,

676
00:34:28,640 --> 00:34:29,960
Speaker 1: I know the reason I raise.

677
00:34:29,800 --> 00:34:32,360
Speaker 2: It market It's a really important point and I'm hoping

678
00:34:32,400 --> 00:34:36,279
Speaker 2: that there's even more transparency. This recent media push on

679
00:34:36,719 --> 00:34:38,359
Speaker 2: the off budget things, I think is a good thing.

680
00:34:38,400 --> 00:34:41,640
Speaker 2: We need more of it. So, Jim Charmers, if you're.

681
00:34:41,520 --> 00:34:43,560
Speaker 1: Watching, mate, Jim definitely watches this.

682
00:34:43,640 --> 00:34:44,880
Speaker 2: Put out some more information.

683
00:34:45,000 --> 00:34:47,399
Speaker 1: Well he told me watches this. We talked about it.

684
00:34:47,440 --> 00:34:51,360
Speaker 1: So he loves you, by the way, No, probably not

685
00:34:51,360 --> 00:34:54,360
Speaker 1: so much for me, but like he rates you. So okay.

686
00:34:54,520 --> 00:34:57,320
Speaker 1: So so we had this week, we had the inflation

687
00:34:57,360 --> 00:35:01,200
Speaker 1: numble to see behind us. We've covered off the difference

688
00:35:01,200 --> 00:35:04,800
Speaker 1: between headline inflation and the trim mean. In other words,

689
00:35:04,800 --> 00:35:07,160
Speaker 1: their trim mean right now is about is actually gone

690
00:35:07,239 --> 00:35:10,040
Speaker 1: up from the last read in October. It's gone from

691
00:35:10,160 --> 00:35:15,359
Speaker 1: three point two to three point five. And when I

692
00:35:15,440 --> 00:35:17,359
Speaker 1: first saw the two point one and I started reading

693
00:35:17,400 --> 00:35:20,799
Speaker 1: a few commentators more more mainstream media talking about wow,

694
00:35:20,840 --> 00:35:22,240
Speaker 1: it looks like we're going to get a rate reduction.

695
00:35:22,280 --> 00:35:24,399
Speaker 1: Immediately looked at the trim mintal that no, no, no, no.

696
00:35:24,880 --> 00:35:27,440
Speaker 1: In actual fact, she's probably going to be even a

697
00:35:27,480 --> 00:35:29,759
Speaker 1: little bit more jaundiced by this number because this number

698
00:35:29,760 --> 00:35:33,480
Speaker 1: is actually bigger than the last read. And then the

699
00:35:33,480 --> 00:35:35,640
Speaker 1: other thing I wanted to cover off then we haven't

700
00:35:35,640 --> 00:35:40,040
Speaker 1: talked about is in her in her last week she made,

701
00:35:40,400 --> 00:35:44,480
Speaker 1: she put out their minutes, and one of the things

702
00:35:44,520 --> 00:35:51,239
Speaker 1: I noticed in there thematically was this consistent theme that

703
00:35:52,880 --> 00:35:57,960
Speaker 1: the RBA does not expect the inflation indicated that they're

704
00:35:58,000 --> 00:36:00,960
Speaker 1: looking for let's call it trim mean to get back

705
00:36:00,960 --> 00:36:04,000
Speaker 1: into where they wanted to be until twenty twenty six. Yes,

706
00:36:04,120 --> 00:36:06,160
Speaker 1: not twenty twenty five, not the inn twenty twenty five,

707
00:36:06,200 --> 00:36:07,360
Speaker 1: but twenty twenty six.

708
00:36:07,719 --> 00:36:08,640
Speaker 2: Eighteen months.

709
00:36:09,000 --> 00:36:12,920
Speaker 1: So should I, if I'm a borrel, should I be

710
00:36:12,920 --> 00:36:14,839
Speaker 1: worried about that? Should I be thinking about maybe it's

711
00:36:14,840 --> 00:36:16,440
Speaker 1: not going to be taken, Maybe it's not going to

712
00:36:16,480 --> 00:36:20,000
Speaker 1: be in a straight reduction in twenty twenty five at all?

713
00:36:20,000 --> 00:36:20,840
Speaker 1: Why would she say that?

714
00:36:20,920 --> 00:36:26,560
Speaker 2: Yeah, she is relying on her forecasting team to produce

715
00:36:26,600 --> 00:36:27,320
Speaker 2: those forecasts.

716
00:36:27,320 --> 00:36:30,000
Speaker 1: Okay, let's say the correct and they've got the best information.

717
00:36:30,440 --> 00:36:34,840
Speaker 2: If they are correct, okay, and it's the midpoint of

718
00:36:34,840 --> 00:36:37,239
Speaker 2: the target, it'll get to the high twos before then.

719
00:36:37,280 --> 00:36:39,400
Speaker 2: But the midpoint is we said before, she is targeting

720
00:36:39,400 --> 00:36:41,800
Speaker 2: two point five. Yeah, two point nine is not bad,

721
00:36:42,000 --> 00:36:43,400
Speaker 2: but it's not what she wants.

722
00:36:43,400 --> 00:36:45,279
Speaker 1: It's better than what it is, but.

723
00:36:45,239 --> 00:36:45,880
Speaker 2: She wants too far.

724
00:36:46,000 --> 00:36:46,200
Speaker 1: Yeah.

725
00:36:46,239 --> 00:36:49,640
Speaker 2: Now, if that were to evolve over the course of

726
00:36:49,640 --> 00:36:51,480
Speaker 2: the next day of the month, so each quarter goes

727
00:36:51,520 --> 00:36:53,440
Speaker 2: from three point five to three point two to two

728
00:36:53,480 --> 00:36:55,520
Speaker 2: point nine to two point eight to two point five,

729
00:36:55,800 --> 00:36:58,719
Speaker 2: whatever that trajectory is, if it's something like that, which

730
00:36:58,719 --> 00:37:02,759
Speaker 2: I think is roughly what they fork are, then you've

731
00:37:02,760 --> 00:37:08,520
Speaker 2: got your what we might call a neutral or equilibrium

732
00:37:08,680 --> 00:37:15,320
Speaker 2: inflation rate. So therefore you need a neutral or equilibrium

733
00:37:15,360 --> 00:37:17,719
Speaker 2: interest rate, right, because if you keep and they say

734
00:37:17,719 --> 00:37:20,120
Speaker 2: the four point three to five official interest rate today

735
00:37:20,480 --> 00:37:23,640
Speaker 2: is restrictive yep. We all agree. Everybody and their dog

736
00:37:23,680 --> 00:37:28,360
Speaker 2: agrees that it's restrictive. Yep. So they would be trimming.

737
00:37:28,880 --> 00:37:31,080
Speaker 2: Don't mean you word trimming. They would be cutting interest

738
00:37:31,120 --> 00:37:34,359
Speaker 2: rates as that inflation rate fell, because they if they

739
00:37:34,440 --> 00:37:36,880
Speaker 2: kept them at four point three five and didn't cut

740
00:37:37,160 --> 00:37:39,640
Speaker 2: as the trimmed mean inflation rate went from three point

741
00:37:39,640 --> 00:37:41,560
Speaker 2: five to three point three to two point nine to

742
00:37:41,600 --> 00:37:44,279
Speaker 2: two point eight, it would overshoot on the down and

743
00:37:44,360 --> 00:37:46,080
Speaker 2: then go to two point two to one point nine.

744
00:37:46,080 --> 00:37:48,680
Speaker 2: And you know, because we would still we the Australian

745
00:37:48,719 --> 00:37:52,000
Speaker 2: community and the economy would still be under pressure from

746
00:37:52,080 --> 00:37:56,520
Speaker 2: restrictive rates. So it says to me that when we

747
00:37:56,600 --> 00:38:02,200
Speaker 2: get to that dream bullseye two point five percent inflation target,

748
00:38:02,239 --> 00:38:05,120
Speaker 2: if it's hit in let's say eighteen months time, they'll

749
00:38:05,120 --> 00:38:07,879
Speaker 2: have adjusted rates to neutral. And this is again it's

750
00:38:07,880 --> 00:38:09,480
Speaker 2: a bit little bit like mayry. I don't want bring

751
00:38:09,600 --> 00:38:12,920
Speaker 2: up Mary, but like the neutral interest rate, what's one

752
00:38:12,920 --> 00:38:14,600
Speaker 2: that's not too hot and not too cold. It doesn't

753
00:38:14,680 --> 00:38:16,960
Speaker 2: help your economy, but it doesn't hindred. We know that

754
00:38:16,960 --> 00:38:23,360
Speaker 2: it's about three three and a quarter percent maybe, so

755
00:38:23,440 --> 00:38:25,719
Speaker 2: it's about a percent or maybe a fraction more than

756
00:38:25,760 --> 00:38:28,080
Speaker 2: a percent lower than it is today. So if we

757
00:38:28,120 --> 00:38:32,839
Speaker 2: get to the middle of twenty twenty six inflations at

758
00:38:32,880 --> 00:38:35,560
Speaker 2: two point five and looks like hovering around two point five,

759
00:38:36,320 --> 00:38:38,840
Speaker 2: I reckon we'll have had one hundred points roughly of

760
00:38:38,880 --> 00:38:42,440
Speaker 2: rate cuts over that time. Now, they might start later

761
00:38:42,520 --> 00:38:46,080
Speaker 2: than sooner. But if we get that two point nine

762
00:38:46,840 --> 00:38:49,319
Speaker 2: three two point nine being registered, you know, the not

763
00:38:49,360 --> 00:38:53,319
Speaker 2: too distant future, they'll do a twenty five. They'll do

764
00:38:53,320 --> 00:38:56,280
Speaker 2: a twenty five, they'll do what we might call baby steps.

765
00:38:56,320 --> 00:38:59,120
Speaker 2: So just ravery causeus just put their foot in the water. Yeah,

766
00:38:59,160 --> 00:39:01,120
Speaker 2: we can go twenty five. Okay, let's see what happens.

767
00:39:01,160 --> 00:39:05,120
Speaker 1: So so in terms of let's call it trim, mean,

768
00:39:05,560 --> 00:39:07,680
Speaker 1: we're at three and a half an hour, Let's say

769
00:39:07,680 --> 00:39:10,240
Speaker 1: it goes to three point two. What's the magic number

770
00:39:10,800 --> 00:39:14,200
Speaker 1: that you think will be we'll see. Yeah, obviously not

771
00:39:14,960 --> 00:39:18,000
Speaker 1: relying on this, but what would be the number two

772
00:39:18,000 --> 00:39:20,200
Speaker 1: point nine to where do you think they'll make their

773
00:39:20,280 --> 00:39:21,000
Speaker 1: first rate cut.

774
00:39:22,520 --> 00:39:23,680
Speaker 2: Don't forget unemployment.

775
00:39:24,560 --> 00:39:26,440
Speaker 1: That's I don't want to talk about amployment because that's

776
00:39:26,440 --> 00:39:27,799
Speaker 1: too complicated.

777
00:39:27,880 --> 00:39:33,120
Speaker 2: But it's crept up a bit if the unperplant rates wages.

778
00:39:34,320 --> 00:39:38,160
Speaker 1: Let me add into that unemployment is four point three, right,

779
00:39:38,239 --> 00:39:39,080
Speaker 1: it's four point.

780
00:39:38,840 --> 00:39:40,719
Speaker 2: Four point one. So just say in the next three months,

781
00:39:40,719 --> 00:39:43,960
Speaker 2: we get to let's say February March something like that.

782
00:39:43,960 --> 00:39:45,560
Speaker 2: The next three or four months and we get four

783
00:39:45,560 --> 00:39:47,160
Speaker 2: point one, four point two, four point three, and it

784
00:39:47,200 --> 00:39:54,239
Speaker 2: hovers around there. If that trimmed mean number goes to

785
00:39:55,239 --> 00:39:59,279
Speaker 2: three point to two point nine, I think they'll give

786
00:39:59,280 --> 00:40:03,879
Speaker 2: the first twenty five right, and the wording, as they're

787
00:40:03,880 --> 00:40:06,640
Speaker 2: always very cautious about their wording, will be Look, here's

788
00:40:06,640 --> 00:40:09,040
Speaker 2: a rate cut, don't expect too many. We're going to

789
00:40:09,120 --> 00:40:11,759
Speaker 2: take a very cautious approach. We're optimistic that we're going

790
00:40:11,800 --> 00:40:14,080
Speaker 2: to hit the two point five, but if we don't,

791
00:40:14,080 --> 00:40:16,359
Speaker 2: we won't do anymore. If it looks if we're still

792
00:40:16,360 --> 00:40:18,520
Speaker 2: on track with two point five next meeting, we might

793
00:40:18,520 --> 00:40:21,920
Speaker 2: go another twenty five right, And so they'll be really

794
00:40:22,080 --> 00:40:23,759
Speaker 2: really pragmatic on what they do.

795
00:40:23,880 --> 00:40:26,160
Speaker 1: So what I'm taking out of that then could use

796
00:40:26,200 --> 00:40:29,160
Speaker 1: it where we don't have to wait until sometime in

797
00:40:29,160 --> 00:40:32,440
Speaker 1: twenty twenty six, assuming the Reserve Banks modeling is correct,

798
00:40:32,600 --> 00:40:36,919
Speaker 1: where they are going to hit two point five, which

799
00:40:37,120 --> 00:40:41,000
Speaker 1: according to their modeling, to wait for an interest rate reduction.

800
00:40:41,640 --> 00:40:45,359
Speaker 1: In other words, the interest rate reductions could well move

801
00:40:45,480 --> 00:40:49,960
Speaker 1: in lockstep with the reduction of the trim mean correct.

802
00:40:50,440 --> 00:40:54,080
Speaker 2: So if you're if you think of it, you've prompted

803
00:40:54,160 --> 00:40:57,279
Speaker 2: the thought as you often do. Mark so that two

804
00:40:57,360 --> 00:40:59,600
Speaker 2: point five if they get two point five in the

805
00:40:59,600 --> 00:41:02,680
Speaker 2: middle of twenty twenty six to five inflation rate, and

806
00:41:02,719 --> 00:41:04,239
Speaker 2: they know they've got to have a cash rate. Let's

807
00:41:04,280 --> 00:41:08,960
Speaker 2: just fragment sake, say three percent, just fragment sake. As

808
00:41:09,000 --> 00:41:12,080
Speaker 2: they see that inflation rate ticking lower, I go from

809
00:41:12,800 --> 00:41:15,160
Speaker 2: four point three five to four point one to two

810
00:41:15,239 --> 00:41:19,760
Speaker 2: point eight. They'll go roughly every quarter every three months,

811
00:41:20,000 --> 00:41:23,120
Speaker 2: so maybe not every meeting, every other meeting, every second meeting,

812
00:41:23,960 --> 00:41:25,480
Speaker 2: knock it down a bit, knock it down to see

813
00:41:25,560 --> 00:41:29,279
Speaker 2: and yeah, and if they're wrong, you know, like we

814
00:41:29,440 --> 00:41:32,040
Speaker 2: all are, from time to time, they'll either pause or

815
00:41:32,040 --> 00:41:34,719
Speaker 2: if it's a bad economy for whatever reason, maybe the

816
00:41:34,760 --> 00:41:37,920
Speaker 2: tariff wars or something, they might go a few more times.

817
00:41:37,960 --> 00:41:40,200
Speaker 2: But I think they'll sort of match you quite right.

818
00:41:40,239 --> 00:41:44,040
Speaker 2: As the inflation rate now falls, not from the peak

819
00:41:44,120 --> 00:41:45,960
Speaker 2: that we saw two years ago seven point eight or

820
00:41:46,000 --> 00:41:48,680
Speaker 2: eight percent, whatever it was. But as the inflation rate

821
00:41:48,840 --> 00:41:52,600
Speaker 2: now falls, you can sort of put a slight tick

822
00:41:52,600 --> 00:41:55,200
Speaker 2: in the box for the rate cut coming soon. But

823
00:41:55,239 --> 00:41:57,920
Speaker 2: you've got to see it fall. We want to say always.

824
00:41:57,960 --> 00:42:01,280
Speaker 2: I like the month of inflation numbers. They are very volatile,

825
00:42:01,560 --> 00:42:03,879
Speaker 2: but it's the quarterly ones that the rbas put all

826
00:42:03,880 --> 00:42:06,080
Speaker 2: their money and the next time out the end of.

827
00:42:06,120 --> 00:42:07,680
Speaker 1: January, So the next one' going to see is the

828
00:42:07,760 --> 00:42:12,600
Speaker 1: end of January after Australia usually gets yes. And what's

829
00:42:12,680 --> 00:42:15,680
Speaker 1: sort of interesting about this all for me anyway, is

830
00:42:16,040 --> 00:42:21,239
Speaker 1: sort of builds a bit of confidence for our customers

831
00:42:21,280 --> 00:42:23,319
Speaker 1: and all the consumers here in Australia, especially those who

832
00:42:23,360 --> 00:42:27,160
Speaker 1: have mortgages, is that there is some hope in all

833
00:42:27,200 --> 00:42:28,799
Speaker 1: this that we're not going to have to wait until

834
00:42:28,800 --> 00:42:31,680
Speaker 1: twenty twenty six when the modeling pans out to be correct.

835
00:42:32,120 --> 00:42:34,919
Speaker 1: We also know that what you're saying is Reserving doesn't

836
00:42:34,920 --> 00:42:37,480
Speaker 1: want to leave it too late because because you know,

837
00:42:38,200 --> 00:42:42,479
Speaker 1: because this could go from two point three point five

838
00:42:42,520 --> 00:42:44,520
Speaker 1: to three point two to two point five to one

839
00:42:44,520 --> 00:42:45,280
Speaker 1: point nine.

840
00:42:45,080 --> 00:42:47,960
Speaker 2: It could, they do not want that to happen. They

841
00:42:48,040 --> 00:42:50,440
Speaker 2: do not like it to be too low.

842
00:42:51,080 --> 00:42:53,840
Speaker 1: And what's also good about this is it brings it

843
00:42:53,840 --> 00:42:56,400
Speaker 1: back a bit of confidence to me because you know,

844
00:42:56,520 --> 00:42:58,720
Speaker 1: what I'm used to seeing and you're used to seeing

845
00:42:59,120 --> 00:43:03,920
Speaker 1: over many, many, many years, is you know, five rate reductions,

846
00:43:04,000 --> 00:43:09,000
Speaker 1: five rate increases, five rate reductions, steady five rate increases,

847
00:43:09,440 --> 00:43:10,760
Speaker 1: steady five rate reduction.

848
00:43:11,040 --> 00:43:13,480
Speaker 2: It was always five and that was that was the

849
00:43:13,560 --> 00:43:16,880
Speaker 2: good normal days okay, when the global financial crisis came.

850
00:43:16,960 --> 00:43:18,480
Speaker 2: Yet they did a couple of really big cuts and

851
00:43:18,800 --> 00:43:22,759
Speaker 2: the pandemic. Fine that they were unusual events in a

852
00:43:22,920 --> 00:43:26,759
Speaker 2: normal cycle of ups and downs in the economy, in inflation,

853
00:43:27,000 --> 00:43:30,359
Speaker 2: in unemployment. They do, do you know, a couple of

854
00:43:30,440 --> 00:43:32,600
Speaker 2: moves in the one direct down or up so that

855
00:43:32,600 --> 00:43:35,879
Speaker 2: we're talking downs now they do, then they'll just sit

856
00:43:35,960 --> 00:43:38,120
Speaker 2: back for a few months and if it pans out,

857
00:43:38,160 --> 00:43:41,439
Speaker 2: oh he's another one. Or again we've seen this many

858
00:43:41,480 --> 00:43:44,920
Speaker 2: many times. You know, there's histories sort of filled with examples.

859
00:43:45,040 --> 00:43:48,280
Speaker 2: They've less infrastrate steady for eighteen months. Well, they've already

860
00:43:48,360 --> 00:43:51,040
Speaker 2: up to the last move was in November last years

861
00:43:51,040 --> 00:43:53,640
Speaker 2: sore up to heading to thirteen months. They don't met

862
00:43:53,680 --> 00:43:57,880
Speaker 2: in January, that's fourteen months February, assuming they don't go,

863
00:43:57,960 --> 00:44:01,240
Speaker 2: then that's fifteen sixteen going to be close to awaiting

864
00:44:01,320 --> 00:44:03,880
Speaker 2: much with no change. Despite how much we talk about it.

865
00:44:03,760 --> 00:44:06,839
Speaker 1: As a matter of context and so we don't get

866
00:44:06,880 --> 00:44:12,120
Speaker 1: people don't get too over stressed about all this. What

867
00:44:12,160 --> 00:44:13,719
Speaker 1: you said at the re important point, we've had like

868
00:44:14,280 --> 00:44:17,480
Speaker 1: twelve third I can't remember now, twelve thirty interest rate rises.

869
00:44:17,560 --> 00:44:19,640
Speaker 1: Quite a number of those and fifty base point rises.

870
00:44:20,000 --> 00:44:22,799
Speaker 1: As you then said, like been a long time since

871
00:44:22,840 --> 00:44:24,920
Speaker 1: we had a rate rise, but definitely even longer time

872
00:44:24,960 --> 00:44:30,839
Speaker 1: since we've had a rate reduction. Is this because and

873
00:44:30,880 --> 00:44:34,239
Speaker 1: this is very unusual what we are currently experiencing, this

874
00:44:34,520 --> 00:44:43,040
Speaker 1: long high interest rate period is unusual? Is that because

875
00:44:43,040 --> 00:44:47,760
Speaker 1: we had such an unusual interest rate decrease during COVID,

876
00:44:47,800 --> 00:44:49,600
Speaker 1: and that came off the back of ten years of

877
00:44:49,680 --> 00:44:53,840
Speaker 1: rate reductions since GFC. So we had such an unusual

878
00:44:54,000 --> 00:44:55,840
Speaker 1: period before we're going to have to expect to have

879
00:44:55,880 --> 00:44:57,040
Speaker 1: an unusual period after.

880
00:44:57,239 --> 00:44:59,960
Speaker 2: Mark You've said something that not many people have focused on.

881
00:45:00,800 --> 00:45:04,279
Speaker 2: Before COVID came along, the official cash right Australia was

882
00:45:04,480 --> 00:45:08,000
Speaker 2: one percent. So when and this is this question about

883
00:45:08,000 --> 00:45:11,120
Speaker 2: did the RBA have enough AMMO to sort of tackle

884
00:45:11,480 --> 00:45:13,920
Speaker 2: a crisis when it came along and it sort of

885
00:45:13,960 --> 00:45:17,000
Speaker 2: didn't cut raised to point one fine and that's what

886
00:45:17,080 --> 00:45:18,479
Speaker 2: I had to print money. That's what I was buying

887
00:45:18,480 --> 00:45:21,319
Speaker 2: government bonds, the lending money to the banks at point

888
00:45:21,400 --> 00:45:24,640
Speaker 2: one percent? What that two hundred billion dollars And then

889
00:45:24,920 --> 00:45:27,200
Speaker 2: that was why the federal government, in addition to the

890
00:45:27,280 --> 00:45:31,520
Speaker 2: RBA's stimulus pump money to job keeper, job seeker, all

891
00:45:31,560 --> 00:45:32,560
Speaker 2: this other stuff, because.

892
00:45:32,320 --> 00:45:34,400
Speaker 1: It was ten years in rate productions before COVID.

893
00:45:34,640 --> 00:45:36,799
Speaker 2: Yes, there hadn't been a rate hike since twenty ten,

894
00:45:36,880 --> 00:45:39,800
Speaker 2: I think it was, and then we had this very

895
00:45:39,840 --> 00:45:44,560
Speaker 2: gradual rate cutting cycle over over a decade and then so.

896
00:45:45,280 --> 00:45:48,880
Speaker 1: Itself is very unusual, really, Yes, that was make historically

897
00:45:48,960 --> 00:45:51,000
Speaker 1: over fifty years since they've been taken raising.

898
00:45:51,080 --> 00:45:55,200
Speaker 2: Yep. No, No, we usually get eighteen months or two

899
00:45:55,280 --> 00:45:58,960
Speaker 2: years of rate up or down, six to eighteen months

900
00:45:58,960 --> 00:46:01,640
Speaker 2: where they're steady and then the reverse happened. Yeah, yeah,

901
00:46:01,760 --> 00:46:03,320
Speaker 2: I remember that conversation.

902
00:46:03,920 --> 00:46:05,080
Speaker 1: But that's how we used to be all the.

903
00:46:05,000 --> 00:46:08,040
Speaker 2: Time, and okay, to pick the timing and occasionally they

904
00:46:08,080 --> 00:46:10,239
Speaker 2: went a couple more than they either up or down

905
00:46:10,560 --> 00:46:13,120
Speaker 2: back in the day, but this time they were starting

906
00:46:13,160 --> 00:46:16,520
Speaker 2: from such a low point before COVID. They cut them

907
00:46:16,520 --> 00:46:19,560
Speaker 2: to such a low level during COVID, and so they

908
00:46:19,560 --> 00:46:21,920
Speaker 2: had to play catch up in the period when we

909
00:46:22,600 --> 00:46:24,560
Speaker 2: learned to live with COVID, and you know, things are

910
00:46:24,600 --> 00:46:27,840
Speaker 2: open again and that's where the inflation pressure boom boomed.

911
00:46:28,120 --> 00:46:32,879
Speaker 1: So therefore it's sort of explainable why it's such been

912
00:46:32,960 --> 00:46:36,040
Speaker 1: such a long period we have been that's call it

913
00:46:36,040 --> 00:46:41,719
Speaker 1: suffering these high rates, relatively high rates. So do you

914
00:46:41,800 --> 00:46:47,279
Speaker 1: expect us to get back let's call it normalize. So

915
00:46:47,520 --> 00:46:48,600
Speaker 1: do you think we'll normalize?

916
00:46:48,880 --> 00:46:49,600
Speaker 2: I think so.

917
00:46:49,719 --> 00:46:51,520
Speaker 1: And one of the things that this sort of gives

918
00:46:51,560 --> 00:46:52,960
Speaker 1: you confidence about that, Yeah.

919
00:46:53,760 --> 00:46:59,920
Speaker 2: The slow economy will feed into weaker inflation. It's an

920
00:47:00,480 --> 00:47:03,040
Speaker 2: a statement of fact in economics, and the economics textbooks

921
00:47:03,040 --> 00:47:05,440
Speaker 2: haven't been rewritten on that sort of thing. So, and

922
00:47:05,480 --> 00:47:08,439
Speaker 2: the productivity improvements are coming through that. We had cap

923
00:47:08,560 --> 00:47:13,000
Speaker 2: X numbers today showing that firms are investing so much

924
00:47:13,040 --> 00:47:18,040
Speaker 2: money on equipment, machinery, artificial intelligence, which are productivity boosting.

925
00:47:18,120 --> 00:47:20,560
Speaker 2: You can produce more with a press of a button

926
00:47:20,640 --> 00:47:23,600
Speaker 2: or a robot or these sort of things. And while

927
00:47:23,600 --> 00:47:26,080
Speaker 2: there are other implications which are sort of a story

928
00:47:26,080 --> 00:47:28,799
Speaker 2: for another day, they are good for the economy that

929
00:47:28,840 --> 00:47:32,960
Speaker 2: these things are coming through. That is low inflation. China

930
00:47:33,040 --> 00:47:36,000
Speaker 2: is very weak, and what that means is that they

931
00:47:36,000 --> 00:47:40,000
Speaker 2: are exporting goods at a low price. One of the

932
00:47:40,040 --> 00:47:42,239
Speaker 2: reasons we had low inflation in the late nineties and

933
00:47:42,320 --> 00:47:46,439
Speaker 2: two thousands was China was producing all these electronic goods

934
00:47:46,640 --> 00:47:50,000
Speaker 2: as cheap as chips, and we were importing low inflation

935
00:47:50,080 --> 00:47:52,759
Speaker 2: from China, just up to go to Bunnings and look

936
00:47:52,800 --> 00:47:55,719
Speaker 2: around there for the drills and all the electronic items there.

937
00:47:55,760 --> 00:47:59,920
Speaker 2: They're so cheap. So that's going to put pressure down

938
00:48:00,239 --> 00:48:04,080
Speaker 2: on inflation, and it is working. I look around the

939
00:48:04,080 --> 00:48:06,200
Speaker 2: world and see the inflation rates in these other countries.

940
00:48:06,239 --> 00:48:07,960
Speaker 2: Just I don't want to labor that point too much,

941
00:48:08,000 --> 00:48:09,799
Speaker 2: but you know, what's happening in the rest of the

942
00:48:09,800 --> 00:48:12,440
Speaker 2: world does also happen in Australia slightly differently. You know,

943
00:48:12,480 --> 00:48:14,799
Speaker 2: we're mining and more mining than Europe and all these

944
00:48:14,800 --> 00:48:20,359
Speaker 2: other things, but the main crux of the issue does

945
00:48:20,400 --> 00:48:21,200
Speaker 2: happen here as well.

946
00:48:21,360 --> 00:48:21,840
Speaker 1: Eventually.

947
00:48:22,560 --> 00:48:25,800
Speaker 2: Yeah, we're a little bit different, but we're not that different.

948
00:48:25,800 --> 00:48:26,920
Speaker 1: And we started a little slower.

949
00:48:27,640 --> 00:48:29,720
Speaker 2: Yeah, we started a little slower in the hiking process,

950
00:48:29,800 --> 00:48:34,600
Speaker 2: so that no rate ike's till twenty twenty four, that error,

951
00:48:34,880 --> 00:48:37,239
Speaker 2: and so they caught up after that, and now we're

952
00:48:37,280 --> 00:48:40,080
Speaker 2: sort of paying part of the price that we're going

953
00:48:40,120 --> 00:48:41,000
Speaker 2: to be slower to cut.

954
00:48:41,760 --> 00:48:43,520
Speaker 1: Right, let's have a look at your board.

955
00:48:43,360 --> 00:48:47,000
Speaker 2: Mate, Okay, mark our famous monetary policy checklist board.

956
00:48:47,239 --> 00:48:49,279
Speaker 1: Everyone talks about it, and I.

957
00:48:49,200 --> 00:48:52,480
Speaker 2: Love it too because it explains it's so easily. Okay, GDP.

958
00:48:52,600 --> 00:48:55,360
Speaker 2: So where's the economy. It's really weak, we be easing.

959
00:48:55,960 --> 00:48:59,279
Speaker 2: We get the September quarter numbers next week they'll show

960
00:48:59,320 --> 00:49:02,120
Speaker 2: GDP about one point three percent in annual terms.

961
00:49:02,239 --> 00:49:05,880
Speaker 1: Two week, what would they come the right to see?

962
00:49:06,200 --> 00:49:07,840
Speaker 2: Gumble would love to see two and a half to

963
00:49:07,880 --> 00:49:09,640
Speaker 2: two and three quarters, maybe three percent.

964
00:49:09,719 --> 00:49:11,720
Speaker 1: What are their budget? What's the budget assumption?

965
00:49:11,960 --> 00:49:14,520
Speaker 2: Budget? The budget assumptions are between two and a half

966
00:49:14,520 --> 00:49:17,359
Speaker 2: and two point seventy five and at one point three

967
00:49:17,520 --> 00:49:20,360
Speaker 2: one point four. It's really weak. If that was the

968
00:49:20,400 --> 00:49:24,720
Speaker 2: only thing, they'd be cutting inflation putting out there still

969
00:49:25,000 --> 00:49:27,360
Speaker 2: they're not going to hike. I'll put in neutral because

970
00:49:27,360 --> 00:49:28,799
Speaker 2: they're not going to hike. They're not going to cut.

971
00:49:29,080 --> 00:49:32,160
Speaker 2: As we've had that long discussion, labor.

972
00:49:31,840 --> 00:49:35,600
Speaker 1: Market an unemployment, Ye, unemployment, it's four point one, still

973
00:49:35,640 --> 00:49:36,120
Speaker 1: hasn't much.

974
00:49:36,520 --> 00:49:39,880
Speaker 2: It hasn't budge marked luck. This weakness in the economy

975
00:49:39,920 --> 00:49:43,440
Speaker 2: I've got if I've got thirty seconds, I've heard this

976
00:49:43,560 --> 00:49:46,960
Speaker 2: discussion from people who are smarter than me talking about it.

977
00:49:47,680 --> 00:49:50,040
Speaker 2: The change in our labor market in the last five

978
00:49:50,080 --> 00:49:52,360
Speaker 2: to ten years means that we're not getting that increase

979
00:49:52,400 --> 00:49:58,279
Speaker 2: in unemployment. Because if you lose your job at retailer

980
00:49:58,400 --> 00:50:02,080
Speaker 2: or something. You go home, you think, bager, I've lost

981
00:50:02,080 --> 00:50:04,319
Speaker 2: my job. I still need to get some cash. Oh,

982
00:50:04,400 --> 00:50:06,319
Speaker 2: I'm going to drive my car and become an uber driver.

983
00:50:07,239 --> 00:50:10,360
Speaker 2: So you're going to get some money, maybe not what

984
00:50:10,400 --> 00:50:11,920
Speaker 2: you're earning before, but you're going to keep your head

985
00:50:11,920 --> 00:50:15,680
Speaker 2: above water financially. And so the job's numbers look good

986
00:50:16,480 --> 00:50:18,560
Speaker 2: even though people are hurting financial.

987
00:50:18,200 --> 00:50:19,759
Speaker 1: Because they're not registered for unemployment.

988
00:50:19,800 --> 00:50:22,520
Speaker 2: Correct if you're driving but you're not unemployed, no, or

989
00:50:22,560 --> 00:50:25,520
Speaker 2: other things like that. So that flexibility. And you look

990
00:50:25,520 --> 00:50:27,799
Speaker 2: at the number of new abns AUS trained businessnumbers that

991
00:50:27,800 --> 00:50:29,959
Speaker 2: have been created from the Tax Office, bloody huge.

992
00:50:29,960 --> 00:50:31,360
Speaker 1: And which is what do you guys have to do?

993
00:50:31,400 --> 00:50:32,440
Speaker 2: What you've got to do. You've got to get an

994
00:50:32,440 --> 00:50:34,520
Speaker 2: AB and you've got to set up yourself as a company.

995
00:50:34,600 --> 00:50:35,280
Speaker 1: That's interesting.

996
00:50:35,400 --> 00:50:38,799
Speaker 2: So it's really interesting. So that company increases. Maybe we

997
00:50:38,840 --> 00:50:40,680
Speaker 2: don't know yet, we need to see a bit more research,

998
00:50:40,760 --> 00:50:44,080
Speaker 2: but maybe that's the labor market wages. Now, that's one

999
00:50:44,080 --> 00:50:46,279
Speaker 2: of the smooth from last time the wage numbers came

1000
00:50:46,320 --> 00:50:49,120
Speaker 2: out two weeks ago, three and a half percent for

1001
00:50:49,239 --> 00:50:53,680
Speaker 2: annual wages growth. That's the goldilocks, not too hot, not

1002
00:50:53,719 --> 00:50:58,120
Speaker 2: too cold, just right. That's a really good result. International economy.

1003
00:50:58,120 --> 00:51:01,400
Speaker 2: I'm putting in easy rate cuts New Zealand, China. We

1004
00:51:01,480 --> 00:51:05,160
Speaker 2: mentioned the world economy really weak still is so if

1005
00:51:05,160 --> 00:51:08,400
Speaker 2: we're part of the world economy, that's rate cuts. House

1006
00:51:08,480 --> 00:51:10,560
Speaker 2: prices they're starting to soften. We haven't really had a

1007
00:51:10,560 --> 00:51:14,560
Speaker 2: good chat about house prices recently, but Sydney's now down

1008
00:51:14,600 --> 00:51:16,040
Speaker 2: a smage like zero point one point.

1009
00:51:16,120 --> 00:51:17,400
Speaker 1: They're not growing it either.

1010
00:51:17,640 --> 00:51:19,879
Speaker 2: No, it's not growing and a one and a half

1011
00:51:19,920 --> 00:51:22,919
Speaker 2: million dollar house one percent who cares, it doesn't matter,

1012
00:51:22,920 --> 00:51:25,160
Speaker 2: but it's gone up so much so I'm leaving housing

1013
00:51:25,160 --> 00:51:27,360
Speaker 2: in neutral. It's sort of they're not worried about it

1014
00:51:27,400 --> 00:51:29,640
Speaker 2: because of house price inflation, nor are they worried about

1015
00:51:29,640 --> 00:51:32,600
Speaker 2: the effect on the banks of a house price crash.

1016
00:51:32,600 --> 00:51:35,360
Speaker 2: They just let it go through to the keeper. Retail

1017
00:51:35,520 --> 00:51:39,680
Speaker 2: sales that's moved from the easing to the slightly less

1018
00:51:39,719 --> 00:51:44,160
Speaker 2: easy September quarter retail sales. While they weren't booming, they

1019
00:51:44,200 --> 00:51:47,040
Speaker 2: are a little bit better. The income tax cuts which

1020
00:51:47,360 --> 00:51:50,280
Speaker 2: most people got on the first of July. These subsidies,

1021
00:51:50,280 --> 00:51:52,799
Speaker 2: they're seventy five bucks. I'm saving electricity did go into

1022
00:51:52,840 --> 00:51:57,520
Speaker 2: retail spending, so still weak, but not as horrendous as

1023
00:51:57,520 --> 00:52:01,640
Speaker 2: it was. Same with consumer sentiment. My mates at Westpac,

1024
00:52:01,640 --> 00:52:04,840
Speaker 2: their consumer sentiment number has gone up fourteen percent wow,

1025
00:52:05,040 --> 00:52:07,000
Speaker 2: in the last three minutes. It's just under one hundred now.

1026
00:52:07,320 --> 00:52:10,839
Speaker 2: The chart is absolutely fantastic. So we're not quite back

1027
00:52:10,880 --> 00:52:13,560
Speaker 2: to neutral, but it's gone up a long way again.

1028
00:52:13,760 --> 00:52:16,000
Speaker 2: Maybe because stock markets are a record high, people got

1029
00:52:16,000 --> 00:52:18,480
Speaker 2: a bit more money in their pocket. Inflations down, so

1030
00:52:18,520 --> 00:52:20,360
Speaker 2: that helps your cost of living, so that might be

1031
00:52:20,400 --> 00:52:25,640
Speaker 2: part of the red up. YEP, building approvals, keep that

1032
00:52:25,719 --> 00:52:28,000
Speaker 2: in easy. We need to build more housing. Even though

1033
00:52:28,040 --> 00:52:30,600
Speaker 2: building approvals have inched up the last little bit, they're

1034
00:52:30,640 --> 00:52:34,920
Speaker 2: still bloody. Week business investment, we had CAPEX numbers solid,

1035
00:52:35,600 --> 00:52:37,800
Speaker 2: neither good nor bad again, so they're okay, So I

1036
00:52:37,880 --> 00:52:41,400
Speaker 2: leave that one. Their business confidence, I'm tilting towards the

1037
00:52:41,400 --> 00:52:44,800
Speaker 2: easing side. The NAB survey of Business Confidence and business

1038
00:52:44,840 --> 00:52:50,400
Speaker 2: conditions tracking lower with the economy. So businesses are okay,

1039
00:52:50,719 --> 00:52:56,160
Speaker 2: but they're not strong. Commodities dead neutral oils, really cheap

1040
00:52:56,360 --> 00:52:58,279
Speaker 2: iron ores come off, but then you've got a lot

1041
00:52:58,280 --> 00:53:00,960
Speaker 2: of agricultural commodities going back up, so that's your inflation

1042
00:53:01,000 --> 00:53:04,720
Speaker 2: that's your global inflation things, so olive oil, orange juice, coffee,

1043
00:53:05,440 --> 00:53:06,920
Speaker 2: which are really important commodities.

1044
00:53:07,000 --> 00:53:07,960
Speaker 1: You know, they're basics.

1045
00:53:08,320 --> 00:53:12,680
Speaker 2: Yep, stock markets at a record high Titan, I'll leave

1046
00:53:12,719 --> 00:53:15,279
Speaker 2: it in neutral. The RBI never mentions the stock market

1047
00:53:15,320 --> 00:53:16,640
Speaker 2: unless it's crashing.

1048
00:53:16,760 --> 00:53:18,000
Speaker 1: But it does have an effect on the world.

1049
00:53:18,239 --> 00:53:19,360
Speaker 2: It has a wealth effect, definitely.

1050
00:53:19,400 --> 00:53:21,360
Speaker 1: Yeah, especially for your superinnovation account.

1051
00:53:21,400 --> 00:53:23,840
Speaker 2: So everybody to check your super balance. You're probably looking okay,

1052
00:53:24,800 --> 00:53:27,080
Speaker 2: and current rates are restrictive, so i'll move that to

1053
00:53:27,120 --> 00:53:31,319
Speaker 2: the easing side. So we're not talking rate hikes. We're

1054
00:53:31,360 --> 00:53:34,520
Speaker 2: either on hold or cutting at some stage, so there's

1055
00:53:34,560 --> 00:53:37,279
Speaker 2: still enough. As we mentioned before, up the top end

1056
00:53:37,280 --> 00:53:39,800
Speaker 2: of the board, they're the ones that have a higher weighting.

1057
00:53:39,840 --> 00:53:43,080
Speaker 2: They're way more important. And these three which are neutral,

1058
00:53:43,560 --> 00:53:45,399
Speaker 2: are way more important than these ones that are sort

1059
00:53:45,400 --> 00:53:50,719
Speaker 2: of in the easing side, so inflation, labor market. They're

1060
00:53:50,760 --> 00:53:53,560
Speaker 2: the two buttons, red buttons that we have to move

1061
00:53:53,600 --> 00:53:56,000
Speaker 2: across to the easing side before we can put our

1062
00:53:56,000 --> 00:53:58,080
Speaker 2: hand on a heart and say eight RBA. You've got

1063
00:53:58,120 --> 00:53:58,840
Speaker 2: to start cutting.

1064
00:53:59,120 --> 00:54:02,120
Speaker 1: And by the way, those two buttons they are there,

1065
00:54:02,120 --> 00:54:06,839
Speaker 1: two red buttons in the neutral column. Ye, if we are.

1066
00:54:07,040 --> 00:54:10,160
Speaker 1: We've just discussed this. We need to get the first one,

1067
00:54:10,200 --> 00:54:12,120
Speaker 1: which is inflation or CUPR. We need to get that

1068
00:54:12,200 --> 00:54:14,160
Speaker 1: into have a too in front of it.

1069
00:54:14,719 --> 00:54:16,560
Speaker 2: One. Yes, it has two points something, even if it's

1070
00:54:16,560 --> 00:54:17,360
Speaker 2: two point nine.

1071
00:54:17,520 --> 00:54:21,200
Speaker 1: Yeah, trimmed. Yeah, the trim the trim mean or the

1072
00:54:21,239 --> 00:54:24,239
Speaker 1: trim measure or the underlying inflation number, however they refer

1073
00:54:24,320 --> 00:54:27,240
Speaker 1: to it. Then you'll then coul you you'll be putting

1074
00:54:27,239 --> 00:54:30,080
Speaker 1: on that red button over news. I would for sure, yes,

1075
00:54:30,160 --> 00:54:31,120
Speaker 1: And I.

1076
00:54:31,000 --> 00:54:34,239
Speaker 2: Was sort of hoping to on this monthly number. When

1077
00:54:34,239 --> 00:54:35,680
Speaker 2: the headline figure was two point one, I.

1078
00:54:35,640 --> 00:54:37,160
Speaker 1: Thought, oh god, what's because they're so low.

1079
00:54:37,400 --> 00:54:38,960
Speaker 2: That's the trim. I thought there must be some effect

1080
00:54:39,000 --> 00:54:41,759
Speaker 2: on the trim. Yeah, it must be like three point

1081
00:54:41,800 --> 00:54:44,880
Speaker 2: one or three point two, not the three point five.

1082
00:54:44,960 --> 00:54:48,239
Speaker 1: There must be but those items that have just on

1083
00:54:48,280 --> 00:54:50,280
Speaker 1: this and we'll finish off with this. But that's interesting,

1084
00:54:50,280 --> 00:54:52,040
Speaker 1: you just raised because I did want to mention this too.

1085
00:54:52,800 --> 00:54:57,680
Speaker 1: The last quarterly number was two point seven I think for.

1086
00:54:57,719 --> 00:55:00,560
Speaker 2: The annual Yes, for the quarter headline yep.

1087
00:55:00,480 --> 00:55:03,200
Speaker 1: But the trim mean was three point two. Yes, but

1088
00:55:03,680 --> 00:55:06,120
Speaker 1: this one's two point one. But the trim means three

1089
00:55:06,160 --> 00:55:08,799
Speaker 1: point five, So there must have been quite a lot

1090
00:55:08,840 --> 00:55:11,640
Speaker 1: of stuff they trimmed out with a lot of weight, a.

1091
00:55:11,560 --> 00:55:15,319
Speaker 2: Lot of falling prices, the big falls like not just

1092
00:55:15,400 --> 00:55:20,120
Speaker 2: falling one percent, and again petrol. Yeah, as we know,

1093
00:55:23,040 --> 00:55:27,560
Speaker 2: electricity metal block there. Electricity subsettes were huge. They were

1094
00:55:27,560 --> 00:55:29,480
Speaker 2: trimmed out. Maybe things like clothing and things. They were

1095
00:55:29,480 --> 00:55:31,920
Speaker 2: probably trimmed out because they were the biggest fallers and

1096
00:55:31,960 --> 00:55:34,239
Speaker 2: the things that went up, and we did mention a

1097
00:55:34,239 --> 00:55:38,440
Speaker 2: few of them, like tobacco and education and health care insurance,

1098
00:55:39,120 --> 00:55:42,240
Speaker 2: they were only five or six percent, whereas petrol's minus twelve,

1099
00:55:43,840 --> 00:55:46,680
Speaker 2: electricity was minus thirty. So they trimmed out some really

1100
00:55:46,680 --> 00:55:50,279
Speaker 2: big ones that skewed the trimmed mean higher. In a

1101
00:55:50,400 --> 00:55:53,840
Speaker 2: mathematical sense, it's worth it's worth going to the ABS

1102
00:55:53,880 --> 00:55:57,080
Speaker 2: website ABS dot cou dot AU to the CPI Consumer

1103
00:55:57,120 --> 00:56:00,400
Speaker 2: Price Index and look at the methodology. How the hell

1104
00:56:00,440 --> 00:56:01,719
Speaker 2: do you get the trim number. I have to do

1105
00:56:01,760 --> 00:56:03,320
Speaker 2: that every other month because I forget what they do.

1106
00:56:06,000 --> 00:56:08,760
Speaker 1: Is there a final question, because we've got some questions

1107
00:56:08,800 --> 00:56:11,839
Speaker 1: from some of our listeners that we're going to cover off.

1108
00:56:11,880 --> 00:56:16,319
Speaker 1: But final question for you from me, do you ever

1109
00:56:16,360 --> 00:56:20,080
Speaker 1: get a feeling that there's a bit of a fiction

1110
00:56:20,400 --> 00:56:23,040
Speaker 1: associated with all this stuff, and that whilst we know

1111
00:56:23,080 --> 00:56:26,359
Speaker 1: cost living is going up, but trim means and you know,

1112
00:56:26,680 --> 00:56:32,640
Speaker 1: subsidies waiting. Yeah, I mean, do you ever get to

1113
00:56:32,680 --> 00:56:34,520
Speaker 1: your point of view sort of say, well, is this

1114
00:56:34,600 --> 00:56:38,680
Speaker 1: a whole lot of crap? But it is the system,

1115
00:56:38,960 --> 00:56:40,359
Speaker 1: I don't get me wrong. And the governments are going

1116
00:56:40,360 --> 00:56:42,640
Speaker 1: to make a decision based on the system and the

1117
00:56:42,680 --> 00:56:45,520
Speaker 1: system and those decisions will affect how we live our lives.

1118
00:56:45,640 --> 00:56:49,440
Speaker 2: I do get that frustration from time to time because

1119
00:56:49,480 --> 00:56:52,360
Speaker 2: the inflation rate is the most pure measure. What happened

1120
00:56:52,400 --> 00:56:55,640
Speaker 2: to electricity prices? What happened to bread? What happened to potatoes?

1121
00:56:55,680 --> 00:56:59,920
Speaker 2: What happened to petrol and tires? And insurance premiums and

1122
00:57:00,120 --> 00:57:03,960
Speaker 2: mobile phones, newspapers and yeah, your health insurance as well

1123
00:57:03,960 --> 00:57:06,000
Speaker 2: as other insurance. You know, what happened to these things?

1124
00:57:06,200 --> 00:57:07,880
Speaker 2: They measure those really accurately.

1125
00:57:08,000 --> 00:57:10,560
Speaker 1: But they picked the basket of goods and services.

1126
00:57:10,040 --> 00:57:14,360
Speaker 2: Based on household spending patterns. Right. They revised the waiting

1127
00:57:14,600 --> 00:57:19,800
Speaker 2: every year. It is now so so twenty years ago anymore.

1128
00:57:19,880 --> 00:57:22,640
Speaker 2: Twenty years ago, there were no mobile phones in the basket.

1129
00:57:22,680 --> 00:57:27,440
Speaker 2: They didn't exist as they became popular. They went from

1130
00:57:27,440 --> 00:57:29,840
Speaker 2: a small waiting, maybe half a percent to one percent.

1131
00:57:29,880 --> 00:57:31,680
Speaker 2: I don't know, I can't remember what it is quite now,

1132
00:57:31,720 --> 00:57:34,600
Speaker 2: but you know, so they're now part of the inflation rate,

1133
00:57:35,000 --> 00:57:40,240
Speaker 2: and things like horshes and horse and buggy they might

1134
00:57:40,280 --> 00:57:42,640
Speaker 2: have been an inflation rate all those years ago. Now

1135
00:57:42,640 --> 00:57:45,920
Speaker 2: it's cars, you know. And so they do change it

1136
00:57:46,040 --> 00:57:48,640
Speaker 2: with changes, and you know, I think back in the

1137
00:57:48,680 --> 00:57:50,680
Speaker 2: whole days. This is something I found really amazing. Back

1138
00:57:50,720 --> 00:57:54,960
Speaker 2: in the sixties or something, tobacco had a five percent waiting.

1139
00:57:54,960 --> 00:58:00,720
Speaker 1: People spent on bloody tobacco. Yeah, I remember it. Everybody smoked.

1140
00:58:00,840 --> 00:58:05,520
Speaker 2: Everybody smoked a lot. Anyway, it's now a fraction of that.

1141
00:58:05,560 --> 00:58:07,920
Speaker 2: So it's not because so few people say so. The

1142
00:58:07,960 --> 00:58:10,280
Speaker 2: weights change and even the items that are in the

1143
00:58:10,320 --> 00:58:11,080
Speaker 2: basket change.

1144
00:58:11,120 --> 00:58:17,320
Speaker 1: So it's fair to say though whilst it's arbitrary, it's

1145
00:58:17,360 --> 00:58:18,280
Speaker 1: not capricious.

1146
00:58:19,320 --> 00:58:21,360
Speaker 2: Yeah, that's a good word.

1147
00:58:21,520 --> 00:58:25,400
Speaker 1: It so in other words, that someone makes a decision

1148
00:58:25,920 --> 00:58:27,920
Speaker 1: on behalf of all of us. By the way, it's

1149
00:58:27,960 --> 00:58:30,680
Speaker 1: a group of economists in the abs. They make the call.

1150
00:58:31,400 --> 00:58:34,080
Speaker 1: They definitely don't socialize it with us until after they

1151
00:58:34,080 --> 00:58:37,680
Speaker 1: made the decision. But it's not capricious, because there is

1152
00:58:37,760 --> 00:58:39,840
Speaker 1: mathematics and logic associated.

1153
00:58:39,320 --> 00:58:42,760
Speaker 2: With it, and they and there's a come there is

1154
00:58:42,800 --> 00:58:47,080
Speaker 2: a World Statistical convention. So our labor force numbers are

1155
00:58:47,080 --> 00:58:48,840
Speaker 2: calculated the same as they are in the US and

1156
00:58:48,880 --> 00:58:52,640
Speaker 2: the UK. Methodology wise, the methodology is the same because

1157
00:58:53,120 --> 00:58:55,360
Speaker 2: otherwise you're comparing apples with orangers. Oh, US has got

1158
00:58:55,360 --> 00:58:57,760
Speaker 2: an unemployment rate of four point three and we're four

1159
00:58:57,800 --> 00:59:00,680
Speaker 2: points You know, what's the difference? Are they differently?

1160
00:59:01,160 --> 00:59:01,520
Speaker 1: GP?

1161
00:59:01,640 --> 00:59:04,000
Speaker 2: Some countries calculated a little bit differently, but we try

1162
00:59:04,040 --> 00:59:08,640
Speaker 2: to have the same methodology on inflation, GDP, labor markets.

1163
00:59:08,680 --> 00:59:11,280
Speaker 2: So the Bureau of Statistics here, who have actually got

1164
00:59:11,320 --> 00:59:15,520
Speaker 2: a world class reputation. They are really seen as one

1165
00:59:15,520 --> 00:59:19,480
Speaker 2: of the red statistical agencies. They don't revise data much,

1166
00:59:19,520 --> 00:59:23,640
Speaker 2: they don't sort of make too many errors, whereas other

1167
00:59:23,680 --> 00:59:27,080
Speaker 2: places occasionally see like the US, they revise their employment

1168
00:59:27,160 --> 00:59:31,760
Speaker 2: numbers by a million people because they've got the population

1169
00:59:31,880 --> 00:59:35,640
Speaker 2: estimates wrong. Okay, right, that could be pretty important if

1170
00:59:35,680 --> 00:59:38,280
Speaker 2: you're the person setting interest rates based on these numbers. Oh,

1171
00:59:38,280 --> 00:59:41,320
Speaker 2: we're a million out shit, you know, so we have

1172
00:59:41,360 --> 00:59:44,280
Speaker 2: revisions that get me wrong. But they're nothing like that,

1173
00:59:44,720 --> 00:59:47,280
Speaker 2: And so they try to do a good job there,

1174
00:59:47,440 --> 00:59:49,520
Speaker 2: and they just try to get the numbers right. You know,

1175
00:59:49,520 --> 00:59:51,880
Speaker 2: I've spoken of the ABS and the past on different issues.

1176
00:59:52,320 --> 00:59:53,880
Speaker 2: They just want to get the numbers right. They don't

1177
00:59:53,880 --> 00:59:55,920
Speaker 2: want to get an error in their numbers.

1178
00:59:56,040 --> 00:59:59,160
Speaker 1: And I think we should be clear they are independent

1179
00:59:59,160 --> 00:59:59,680
Speaker 1: of everybody.

1180
01:00:00,040 --> 01:00:02,960
Speaker 2: It's independ of everybody, including the Reserve Bank. So oh yes, yes,

1181
01:00:03,040 --> 01:00:04,160
Speaker 2: the Reserve Bank doesn't even know.

1182
01:00:04,800 --> 01:00:06,560
Speaker 1: We all know at the same time eleven.

1183
01:00:06,280 --> 01:00:09,480
Speaker 2: Thirty when the inflation has come out, as I understand it,

1184
01:00:09,520 --> 01:00:11,840
Speaker 2: the RBA waits at eleven thirty like all of us

1185
01:00:12,000 --> 01:00:15,600
Speaker 2: holy s. Makee look at that number, yeah and react accordingly.

1186
01:00:15,800 --> 01:00:18,080
Speaker 1: Right, let's look at the Q and as we've got yeah,

1187
01:00:18,160 --> 01:00:20,840
Speaker 1: we've got some people right into us. Okay, cool you. Well,

1188
01:00:21,120 --> 01:00:23,280
Speaker 1: first we should be saying things, well that this is mate,

1189
01:00:23,320 --> 01:00:25,640
Speaker 1: and because I think we want to thank you for

1190
01:00:25,680 --> 01:00:27,880
Speaker 1: tuning in. And I want to thank you mate for

1191
01:00:28,200 --> 01:00:31,200
Speaker 1: your time and your intellect that you and your effort

1192
01:00:31,240 --> 01:00:33,520
Speaker 1: that you put into these things, and you put a

1193
01:00:33,520 --> 01:00:34,919
Speaker 1: lot of your personality to mate.

1194
01:00:35,720 --> 01:00:37,720
Speaker 2: Mark, I love it. I wouldn't miss it for the world.

1195
01:00:37,840 --> 01:00:41,200
Speaker 1: Thank you. Now we've got some questions, so let's let's

1196
01:00:41,200 --> 01:00:43,040
Speaker 1: finish our year off. I answer a few questions, So

1197
01:00:43,040 --> 01:00:45,960
Speaker 1: this one's from Joanne, and joe Anne says, should we

1198
01:00:46,040 --> 01:00:49,080
Speaker 1: be concerned about the serviceability buffer remaining at three percent

1199
01:00:49,120 --> 01:00:52,000
Speaker 1: in the fasual future? Now she's talking about the serviceability

1200
01:00:52,000 --> 01:00:54,000
Speaker 1: buffer that sits over the top of a mortgage rate.

1201
01:00:54,080 --> 01:00:56,120
Speaker 1: So let's say the mortgage rate retail rate is six

1202
01:00:56,120 --> 01:01:00,000
Speaker 1: point two. Lenders like me add three percent onto it,

1203
01:01:00,160 --> 01:01:03,960
Speaker 1: so we assess you as to your ability to service

1204
01:01:04,040 --> 01:01:07,600
Speaker 1: a loan at nine point two percent. Do you think

1205
01:01:08,160 --> 01:01:13,680
Speaker 1: given that inflation is reducing and has reduced substantially from

1206
01:01:14,080 --> 01:01:18,680
Speaker 1: December twenty twenty two, that was that was a big deal.

1207
01:01:18,800 --> 01:01:22,280
Speaker 1: I mean, the three percent buffer then probably was about right.

1208
01:01:22,360 --> 01:01:24,880
Speaker 1: But making sure that we do two and a half

1209
01:01:24,920 --> 01:01:26,680
Speaker 1: percent correct, that made sense?

1210
01:01:26,800 --> 01:01:27,240
Speaker 2: Made sense?

1211
01:01:27,320 --> 01:01:28,960
Speaker 1: Yes, do you think it should be now?

1212
01:01:29,160 --> 01:01:31,560
Speaker 2: Yeah? And they can out just the other day saying no,

1213
01:01:31,600 --> 01:01:32,520
Speaker 2: they're not going to change it.

1214
01:01:32,560 --> 01:01:34,560
Speaker 1: Well, some of the bank so am Z I think,

1215
01:01:34,600 --> 01:01:37,040
Speaker 1: said they would like to change it, and I'm not

1216
01:01:37,120 --> 01:01:40,480
Speaker 1: but Westpac and a couple of the banks said CBA

1217
01:01:40,560 --> 01:01:42,320
Speaker 1: said no way, we want to live at three percent.

1218
01:01:42,800 --> 01:01:47,880
Speaker 2: It seems we need a buffer there because economics and

1219
01:01:48,000 --> 01:01:52,120
Speaker 2: markets are so unpredictable, something comes along a pandemic, for example,

1220
01:01:52,360 --> 01:01:54,840
Speaker 2: who fork us that? Nobody? You know just as well,

1221
01:01:54,840 --> 01:01:57,120
Speaker 2: we were reasonably well prepared financially.

1222
01:01:57,280 --> 01:01:58,640
Speaker 1: But you know what, you know what the buffer was

1223
01:01:59,560 --> 01:02:02,760
Speaker 1: when the and the being hit. It was between it's

1224
01:02:02,800 --> 01:02:04,400
Speaker 1: either one point seven, five or two.

1225
01:02:04,440 --> 01:02:06,640
Speaker 2: It was much lowly low. And that's when interestrates were

1226
01:02:06,680 --> 01:02:07,040
Speaker 2: really low.

1227
01:02:07,360 --> 01:02:07,800
Speaker 1: Interest rates.

1228
01:02:07,840 --> 01:02:13,000
Speaker 2: Yeah, I would think my way of approaching that is

1229
01:02:13,000 --> 01:02:18,920
Speaker 2: that there's a range that you have for the mortgage interstrate,

1230
01:02:19,800 --> 01:02:23,120
Speaker 2: and if the mortgage interest rates, say ever, gets below

1231
01:02:23,200 --> 01:02:26,560
Speaker 2: three again, the buffer should probably be four percent. If

1232
01:02:26,560 --> 01:02:28,600
Speaker 2: the mortgage rates between three and five, it should be

1233
01:02:28,640 --> 01:02:31,360
Speaker 2: three percent. If the mortgage rate's above six or seven,

1234
01:02:31,520 --> 01:02:33,800
Speaker 2: it should be two percent. That makes sense because rates.

1235
01:02:34,200 --> 01:02:37,280
Speaker 2: Put it this way, I will swim across Sydney Harbor

1236
01:02:37,280 --> 01:02:40,520
Speaker 2: if mortgage rates at ten percent ever again in my lifetime.

1237
01:02:40,600 --> 01:02:40,880
Speaker 2: They're not.

1238
01:02:42,880 --> 01:02:43,360
Speaker 1: They can't.

1239
01:02:43,600 --> 01:02:45,800
Speaker 2: They won't because for households can't afford.

1240
01:02:45,520 --> 01:02:47,000
Speaker 1: To the country go broke.

1241
01:02:47,120 --> 01:02:53,120
Speaker 2: Correct because we and unless there's some absolutely global disaster,

1242
01:02:53,200 --> 01:02:54,640
Speaker 2: they're not going to go to zero percent again.

1243
01:02:54,880 --> 01:02:56,919
Speaker 1: Maybe maybe maybe the algorithm has to be a little

1244
01:02:56,960 --> 01:02:58,840
Speaker 1: bit a little bit more complicated in that. Could you

1245
01:02:58,960 --> 01:03:02,360
Speaker 1: so maybe the algorithm has to be more like, I

1246
01:03:02,480 --> 01:03:04,720
Speaker 1: like what you're thinking. I like to step up the

1247
01:03:04,760 --> 01:03:07,320
Speaker 1: steps the step ups. But maybe we're also got to say,

1248
01:03:07,600 --> 01:03:09,600
Speaker 1: but there's also got to be something else in the

1249
01:03:09,640 --> 01:03:12,320
Speaker 1: algorithm that wages haven't gone up by one hundred percent.

1250
01:03:12,920 --> 01:03:15,120
Speaker 2: Yes, because of course it's about your income, isn't it

1251
01:03:15,160 --> 01:03:18,280
Speaker 2: your wage? Yep, Jame's got a great question there.

1252
01:03:18,360 --> 01:03:19,880
Speaker 1: It's a complicated answer.

1253
01:03:19,840 --> 01:03:22,680
Speaker 2: And yes, And I would like to think that both

1254
01:03:22,800 --> 01:03:26,720
Speaker 2: the borrower the person applying for the loan is humble

1255
01:03:26,840 --> 01:03:29,520
Speaker 2: enough to sort of say, I'd really like to borrow

1256
01:03:30,200 --> 01:03:33,320
Speaker 2: a whole lot of money, but if rates gype even

1257
01:03:33,360 --> 01:03:35,760
Speaker 2: one percent, I'm in trouble. So therefore I won't borrow

1258
01:03:35,800 --> 01:03:37,800
Speaker 2: that much money. And of course the lender does the

1259
01:03:37,840 --> 01:03:40,000
Speaker 2: due diligence and says, well, hang on, you've got a

1260
01:03:40,040 --> 01:03:45,560
Speaker 2: good income here. We know that it's probably not going

1261
01:03:45,640 --> 01:03:46,959
Speaker 2: to go up more than three and a half percent

1262
01:03:47,000 --> 01:03:48,840
Speaker 2: per around in for the next five years, so therefore

1263
01:03:48,880 --> 01:03:51,880
Speaker 2: we don't want to lend you that huge chunk of cash.

1264
01:03:52,240 --> 01:03:54,040
Speaker 2: So there is a bit of what do we call

1265
01:03:54,080 --> 01:03:58,320
Speaker 2: it discretion, and common sense doesn't always apply, As we

1266
01:03:58,320 --> 01:04:01,440
Speaker 2: saw in the Great the bark in the US mortgage

1267
01:04:01,440 --> 01:04:04,800
Speaker 2: market and the global financial crisis. But that plus a

1268
01:04:04,800 --> 01:04:07,320
Speaker 2: bit of an oversight from the regulators, the Appera and

1269
01:04:07,360 --> 01:04:10,200
Speaker 2: others is probably a good thing. But great question.

1270
01:04:10,480 --> 01:04:14,120
Speaker 1: Which is the reason why we didn't have a global

1271
01:04:14,200 --> 01:04:17,040
Speaker 1: financial crisis here in Australia correctly, so we went through

1272
01:04:17,360 --> 01:04:20,440
Speaker 1: well regulated. Yeah, all right, Jess. I don't know if

1273
01:04:20,480 --> 01:04:22,600
Speaker 1: Jesse Boyer good, but thank you Jess for this question.

1274
01:04:22,680 --> 01:04:25,080
Speaker 1: How much will Trump's tariffs effect Austrai's economy in the

1275
01:04:25,080 --> 01:04:27,320
Speaker 1: most and how wow? We sort of covered it, but

1276
01:04:27,880 --> 01:04:29,280
Speaker 1: just quick quick answer.

1277
01:04:29,240 --> 01:04:32,960
Speaker 2: And really quickly. The tariffs are bad news for global growth.

1278
01:04:34,120 --> 01:04:36,120
Speaker 2: As we said that, the impact will be through our

1279
01:04:36,520 --> 01:04:40,440
Speaker 2: mainly through our exports to China. If he's hitting Chinese

1280
01:04:41,080 --> 01:04:44,960
Speaker 2: exports of solar panels and car parts and mobile phones

1281
01:04:45,280 --> 01:04:48,720
Speaker 2: with a chunky, big tariff, then Chinese demand for the

1282
01:04:48,760 --> 01:04:52,960
Speaker 2: materials they're going to make them, and the energy coal

1283
01:04:53,040 --> 01:04:55,800
Speaker 2: and gas that goes to melt the iron ore down

1284
01:04:55,880 --> 01:04:58,760
Speaker 2: which we export, which we export tons of that to China.

1285
01:04:59,160 --> 01:05:00,680
Speaker 2: We'll be caught in the back quash of that. So

1286
01:05:00,720 --> 01:05:05,360
Speaker 2: it's a negative issue because of the China effect, and

1287
01:05:06,280 --> 01:05:08,640
Speaker 2: on those items, it's very hard for the big mining

1288
01:05:08,680 --> 01:05:12,320
Speaker 2: companies to find an alternative market iron ore. There's other

1289
01:05:12,320 --> 01:05:14,160
Speaker 2: producers and we can't say, oh, Chines not buy it,

1290
01:05:14,200 --> 01:05:17,320
Speaker 2: so we'll sell it to Indonesia. Whereas for the wine

1291
01:05:17,560 --> 01:05:19,760
Speaker 2: tariffs that came in a few years ago, a lot

1292
01:05:19,760 --> 01:05:21,880
Speaker 2: of the wine companies who got hit by China saying

1293
01:05:21,880 --> 01:05:23,600
Speaker 2: I'm not going to buy your wine. Oh, We'll try

1294
01:05:23,600 --> 01:05:27,400
Speaker 2: to market our stuff into Asia or Europe or South America,

1295
01:05:27,400 --> 01:05:29,120
Speaker 2: which they did reasonably well.

1296
01:05:29,320 --> 01:05:32,560
Speaker 1: All Right, Jeff says, what would be his economic impacts

1297
01:05:32,600 --> 01:05:35,880
Speaker 1: if Unt gets him? What about of elbow stays in? Yeah,

1298
01:05:35,920 --> 01:05:36,880
Speaker 1: but we don't know yet.

1299
01:05:37,360 --> 01:05:39,320
Speaker 2: There's been a bit of a chat about policies, but

1300
01:05:39,360 --> 01:05:43,280
Speaker 2: there's nothing concrete. I think the themes are pretty clear.

1301
01:05:43,320 --> 01:05:45,760
Speaker 2: So it's cost of living, however you define that will

1302
01:05:45,800 --> 01:05:49,040
Speaker 2: be an important one that we all decide our votes on.

1303
01:05:50,160 --> 01:05:54,920
Speaker 2: Renewable So Dun's got the nuclear solution to sort of

1304
01:05:55,240 --> 01:05:59,280
Speaker 2: channing out more electricity and keeping probably got a coal

1305
01:05:59,360 --> 01:06:02,160
Speaker 2: and gas more prominent until we get the renewables going

1306
01:06:02,200 --> 01:06:06,120
Speaker 2: as labors sort of putting more money into sun and

1307
01:06:06,520 --> 01:06:09,440
Speaker 2: wind power. That's going to be an issue that some

1308
01:06:09,520 --> 01:06:11,960
Speaker 2: of us will vote on, and I think just general

1309
01:06:12,240 --> 01:06:14,880
Speaker 2: economic management. I'm wondering whether the tax will get it run.

1310
01:06:15,360 --> 01:06:17,600
Speaker 2: It's sort of always done, but I think gets a

1311
01:06:17,680 --> 01:06:19,520
Speaker 2: sort of a run in an election campaign.

1312
01:06:20,120 --> 01:06:21,960
Speaker 1: Trump style. You mean, like Trump style, we're going to

1313
01:06:21,960 --> 01:06:22,840
Speaker 1: reduce it.

1314
01:06:22,880 --> 01:06:24,120
Speaker 2: Maybe it be a company text. I don't if it

1315
01:06:24,160 --> 01:06:26,160
Speaker 2: will be personal tax. We don't mean any votes and

1316
01:06:26,200 --> 01:06:29,400
Speaker 2: company tax cuts, particularly the Colson and Willies, which everybody hates.

1317
01:06:29,400 --> 01:06:30,840
Speaker 2: In the Bank's getting a tax cut, you know. So

1318
01:06:31,120 --> 01:06:33,320
Speaker 2: there is an issue whether we because Trump's going to

1319
01:06:33,360 --> 01:06:38,040
Speaker 2: cut company taxes, whether we get an income tax debate

1320
01:06:38,720 --> 01:06:41,640
Speaker 2: when the budget's deficit. We've mentioned the budget deficit before.

1321
01:06:42,960 --> 01:06:44,960
Speaker 2: I think we just need a couple of years of consolidation.

1322
01:06:45,080 --> 01:06:47,400
Speaker 2: So look, and that's the one good thing about the

1323
01:06:47,440 --> 01:06:51,560
Speaker 2: Australian political scene. While there is there's clearly difference between

1324
01:06:51,600 --> 01:06:54,920
Speaker 2: labor and liberal, yes, there is no doubt, the differences

1325
01:06:54,960 --> 01:06:57,680
Speaker 2: aren't as extreme as in the US. We don't have

1326
01:06:57,680 --> 01:07:01,880
Speaker 2: a Donald Trump, and we don't have a or a Yeah,

1327
01:07:01,920 --> 01:07:03,520
Speaker 2: we don't have them. And the other thing that I

1328
01:07:03,560 --> 01:07:06,280
Speaker 2: think could be what do we call it sand in

1329
01:07:06,280 --> 01:07:08,720
Speaker 2: the gearbox, We're probably going to have a lot of

1330
01:07:08,760 --> 01:07:13,600
Speaker 2: independence teals Greens, these sort of people elected to the Parliament.

1331
01:07:13,760 --> 01:07:15,680
Speaker 2: People are pretty pissed off of the two big parties

1332
01:07:16,120 --> 01:07:18,840
Speaker 2: at the moment, and already we've got sixteen of these

1333
01:07:18,880 --> 01:07:22,000
Speaker 2: minor parties in the House of Representatives. If Labour only

1334
01:07:22,040 --> 01:07:25,000
Speaker 2: lose three or four seats, which on current polling they

1335
01:07:25,040 --> 01:07:28,720
Speaker 2: probably will, they'll have to or Dunton will have to

1336
01:07:28,800 --> 01:07:31,560
Speaker 2: negotiate with all of those independents to form government and

1337
01:07:31,840 --> 01:07:34,000
Speaker 2: or and to get stuff through the Senate. We've seen

1338
01:07:34,040 --> 01:07:34,640
Speaker 2: that this just this.

1339
01:07:34,840 --> 01:07:36,960
Speaker 1: We see another Julia Gilli period, a.

1340
01:07:36,880 --> 01:07:38,440
Speaker 2: Shit show going on in the Senate. We want to

1341
01:07:38,440 --> 01:07:40,840
Speaker 2: pass our legislation, but we're not going to let you

1342
01:07:40,840 --> 01:07:43,360
Speaker 2: do it unless you compromise on this. It makes for

1343
01:07:44,720 --> 01:07:46,480
Speaker 2: potentially difficult government.

1344
01:07:46,320 --> 01:07:48,880
Speaker 1: Lilliam says. And we've got a holy questions. They're going

1345
01:07:48,920 --> 01:07:52,360
Speaker 1: to have to pick through a few, Lilliam says. And

1346
01:07:52,440 --> 01:07:59,680
Speaker 1: you know, you were part of Julia Gillard's yep, non cabinet,

1347
01:07:59,720 --> 01:08:02,280
Speaker 1: a team yep.

1348
01:08:02,560 --> 01:08:03,200
Speaker 2: Fair summary.

1349
01:08:03,520 --> 01:08:07,160
Speaker 1: Do politicians understand economics so they're just listening to advisers.

1350
01:08:08,560 --> 01:08:11,400
Speaker 2: They're pretty Look, they're pretty good. I'll take a step

1351
01:08:11,440 --> 01:08:13,640
Speaker 2: back from that, and I've dealt with people on all

1352
01:08:13,680 --> 01:08:15,800
Speaker 2: sides of politics. Over look at my gray Head. I've

1353
01:08:15,800 --> 01:08:17,680
Speaker 2: been around long time, Mark, as you know, but I

1354
01:08:17,720 --> 01:08:20,320
Speaker 2: did have the close and intimate sort of liaison with

1355
01:08:20,600 --> 01:08:23,519
Speaker 2: the Gillard government back what was that thirteen fourteen years ago.

1356
01:08:25,479 --> 01:08:26,880
Speaker 2: Believe it or not, they.

1357
01:08:26,760 --> 01:08:30,439
Speaker 1: Want to do the right thing, but they understand, they've

1358
01:08:30,479 --> 01:08:33,680
Speaker 1: got what is their level of understanding.

1359
01:08:33,960 --> 01:08:36,840
Speaker 2: Look, they're pretty if you sit them down and say, hey,

1360
01:08:36,920 --> 01:08:42,400
Speaker 2: this is why I'll pick a bit of a debarker

1361
01:08:42,479 --> 01:08:44,880
Speaker 2: item in that period, which was the mining tax.

1362
01:08:45,000 --> 01:08:49,240
Speaker 1: I remember it. I remember I remember giving me a

1363
01:08:49,280 --> 01:08:50,640
Speaker 1: great big lecture.

1364
01:08:50,479 --> 01:08:55,880
Speaker 2: On the on the mining tax. They understood it, but

1365
01:08:56,000 --> 01:09:02,200
Speaker 2: they didn't understand. They didn't understand and how bloody complex

1366
01:09:02,240 --> 01:09:05,680
Speaker 2: it was to explain. And even someone like I know

1367
01:09:05,760 --> 01:09:07,840
Speaker 2: these things moderately, well better than most, I'm not being

1368
01:09:07,960 --> 01:09:10,640
Speaker 2: smart at like here, I thought, holy shit, this is

1369
01:09:10,680 --> 01:09:13,960
Speaker 2: so complicated. You are not even no matter how much

1370
01:09:14,000 --> 01:09:16,320
Speaker 2: revenue you're raising you use that money to fund medicare,

1371
01:09:16,520 --> 01:09:17,840
Speaker 2: you're not going to get in and say, oh that's

1372
01:09:17,840 --> 01:09:19,920
Speaker 2: a great idea because it was so complex. It was

1373
01:09:19,960 --> 01:09:22,240
Speaker 2: a you know, a threshold over the ten year bond

1374
01:09:22,320 --> 01:09:25,519
Speaker 2: yield on a super profits and why don't just charge

1375
01:09:25,560 --> 01:09:29,040
Speaker 2: bloody five bucks a ton on or and that goes

1376
01:09:29,040 --> 01:09:31,200
Speaker 2: to the kom of government full stop, you know, and

1377
01:09:31,240 --> 01:09:33,040
Speaker 2: we use that, you know, for whatever we want to

1378
01:09:33,120 --> 01:09:36,360
Speaker 2: use it for. Understandable people think, oh, fair enough. You know,

1379
01:09:36,400 --> 01:09:39,000
Speaker 2: these mining companies are making truckloads of money five bucks

1380
01:09:39,040 --> 01:09:41,200
Speaker 2: a ton on iron, or they'll still make truckloads of money,

1381
01:09:41,280 --> 01:09:43,000
Speaker 2: but the governor will pick up a few billion bucks.

1382
01:09:43,080 --> 01:09:47,240
Speaker 2: So it's the complexity they look, they do understand. Well,

1383
01:09:47,280 --> 01:09:50,040
Speaker 2: maybe they've got there, but they've got their political hat

1384
01:09:50,080 --> 01:09:52,439
Speaker 2: on ninety eight percent of the time and their economic

1385
01:09:52,520 --> 01:09:53,639
Speaker 2: hat on two percent of the time.

1386
01:09:53,960 --> 01:09:56,920
Speaker 1: It could it also be though that while they're not

1387
01:09:57,479 --> 01:10:00,240
Speaker 1: necessarily knowledgeable about it, so they didn't do anyconom used

1388
01:10:00,240 --> 01:10:03,679
Speaker 1: to agree, or they're not an economist. Once it's explained

1389
01:10:03,680 --> 01:10:05,120
Speaker 1: to them, they understand it.

1390
01:10:05,280 --> 01:10:08,439
Speaker 2: Yes, And particularly like a prime minister or Minister for

1391
01:10:08,520 --> 01:10:11,000
Speaker 2: Finance and Treasure and all these people they tend to

1392
01:10:11,000 --> 01:10:13,280
Speaker 2: come with. To get the point of that role, you've

1393
01:10:13,320 --> 01:10:15,680
Speaker 2: got to do some economic stuff as a junior politician

1394
01:10:15,720 --> 01:10:19,200
Speaker 2: back back in your young days, and you get involved

1395
01:10:19,240 --> 01:10:22,280
Speaker 2: in things like the House of Reps Committee on grilling

1396
01:10:22,360 --> 01:10:24,760
Speaker 2: the Reserve Bank every six months, and so you get

1397
01:10:24,800 --> 01:10:26,840
Speaker 2: to know some economics that way, which is which is good.

1398
01:10:27,720 --> 01:10:30,400
Speaker 2: But I think and a lot of them, look, a

1399
01:10:30,400 --> 01:10:32,840
Speaker 2: lot of them are are pretty good at it. Again,

1400
01:10:32,880 --> 01:10:35,400
Speaker 2: it's just this question where like I'm pretty good at

1401
01:10:35,479 --> 01:10:38,439
Speaker 2: understanding rugby league, but I'll always support South Sydney over

1402
01:10:38,439 --> 01:10:41,839
Speaker 2: recent Suburbs. Mate, We're always going to beat the roosters,

1403
01:10:42,120 --> 01:10:45,320
Speaker 2: even if Latrell goes to the elbow things. So, look,

1404
01:10:45,360 --> 01:10:49,000
Speaker 2: I know how rugby league nor Actually that was shocking.

1405
01:10:49,040 --> 01:10:51,760
Speaker 2: That's probably a really bad example. So they understand it,

1406
01:10:52,439 --> 01:10:55,960
Speaker 2: like I understand rugby league, but I've got my blinkers on.

1407
01:10:56,080 --> 01:10:58,120
Speaker 2: Come on rabbit os and you know, so they say,

1408
01:10:58,120 --> 01:10:59,840
Speaker 2: come on, Labor Party, come on, Liberal Party.

1409
01:11:00,160 --> 01:11:02,920
Speaker 1: That's a good analogy, and so they they and.

1410
01:11:02,840 --> 01:11:06,200
Speaker 2: That dominates so and they might say, oh gee, we

1411
01:11:06,320 --> 01:11:13,640
Speaker 2: should revise the GST, and it's good economics, but politically,

1412
01:11:14,600 --> 01:11:19,240
Speaker 2: politically it's suicide. Yep, it's death. So I won't touch it.

1413
01:11:19,520 --> 01:11:22,559
Speaker 2: Even though we're economists, think yeah, bloody, change the GST.

1414
01:11:23,080 --> 01:11:24,799
Speaker 2: You know, it's part of the tax reform.

1415
01:11:25,240 --> 01:11:28,040
Speaker 1: Here's a long question from Piper. Yeah, are we worried

1416
01:11:28,080 --> 01:11:31,960
Speaker 1: about politicizing the RBIT? Are we worried about politicizing the

1417
01:11:32,040 --> 01:11:35,000
Speaker 1: RBA with this new board shakeup political influence in the

1418
01:11:35,040 --> 01:11:37,560
Speaker 1: central bank doesn't sound like a great move considering the

1419
01:11:37,640 --> 01:11:39,840
Speaker 1: pressure put on the RBA. What do you think.

1420
01:11:40,240 --> 01:11:43,600
Speaker 2: Yeah, look, I'm not worried about politicization of the RBA.

1421
01:11:43,720 --> 01:11:46,320
Speaker 2: It could have already been done because the government still

1422
01:11:46,320 --> 01:11:48,960
Speaker 2: appoints the current RBA board. And there's been one or

1423
01:11:49,000 --> 01:11:50,960
Speaker 2: two examples in a year ago and years gone by

1424
01:11:51,200 --> 01:11:53,840
Speaker 2: of both sides of politics appointing thinking oh jeez, that

1425
01:11:53,880 --> 01:11:56,240
Speaker 2: person really know their stuff, or they're there because they're

1426
01:11:56,840 --> 01:12:00,720
Speaker 2: friends of the current government the new board and this

1427
01:12:00,800 --> 01:12:02,240
Speaker 2: is what this is where the proof will be in

1428
01:12:02,280 --> 01:12:04,280
Speaker 2: the pudding. It might sound like a funny way of

1429
01:12:04,360 --> 01:12:08,519
Speaker 2: answering that question that if they appointed all of their

1430
01:12:08,520 --> 01:12:11,639
Speaker 2: best mates to this new monetary policy below Trump does

1431
01:12:12,280 --> 01:12:14,439
Speaker 2: like and they cut and cut and cut and cut

1432
01:12:14,479 --> 01:12:18,760
Speaker 2: rates to one percent, you know something absolutely crazy. A

1433
01:12:18,760 --> 01:12:22,439
Speaker 2: couple of things would happen. First of all, financial markets

1434
01:12:22,439 --> 01:12:24,439
Speaker 2: would figuratively.

1435
01:12:23,920 --> 01:12:26,160
Speaker 1: Crap themselves I remember having in the UK and it.

1436
01:12:26,120 --> 01:12:28,679
Speaker 2: Would be a mistake. And then the media would say,

1437
01:12:28,680 --> 01:12:30,840
Speaker 2: what the hell is this? And so while you might

1438
01:12:30,880 --> 01:12:35,200
Speaker 2: think we're cutting interest rates for our voters, the negative

1439
01:12:35,200 --> 01:12:38,920
Speaker 2: effect you can't manage the economy would dominate that because

1440
01:12:38,960 --> 01:12:41,839
Speaker 2: the media rightly saying in the markets, and the markets

1441
01:12:41,840 --> 01:12:44,559
Speaker 2: would absolutely punish them beyond belief.

1442
01:12:44,640 --> 01:12:46,519
Speaker 1: That's what happened in the Prime minister in the UK.

1443
01:12:46,600 --> 01:12:52,559
Speaker 1: Remember she trust trust and of course her Treasurer or

1444
01:12:52,760 --> 01:12:56,880
Speaker 1: Yes of Exchequer who became the Prime minister, decided to

1445
01:12:57,120 --> 01:13:00,720
Speaker 1: reduce tax rates ridiculously, and the markets just hammered him,

1446
01:13:00,760 --> 01:13:03,840
Speaker 1: and she became the shortest serving prime minister.

1447
01:13:03,960 --> 01:13:06,680
Speaker 2: Lasted longer than she is ever a forty five days,

1448
01:13:06,760 --> 01:13:08,719
Speaker 2: forty nine days, I think it was, and the bond

1449
01:13:08,760 --> 01:13:12,759
Speaker 2: market employ stray, the UK stock market fell, the British

1450
01:13:12,760 --> 01:13:15,240
Speaker 2: pound went to hell, and so she couldn't even hold

1451
01:13:15,240 --> 01:13:17,840
Speaker 2: onto the prime ministership. That's how and this is why

1452
01:13:17,880 --> 01:13:21,000
Speaker 2: I love our markets. Markets have nice I like looking

1453
01:13:21,040 --> 01:13:23,639
Speaker 2: at bonds and stocks and the Aussie dollar and other

1454
01:13:23,680 --> 01:13:28,200
Speaker 2: currencies because they translate the information very quickly. So if

1455
01:13:28,200 --> 01:13:30,840
Speaker 2: there is a war bang, it sort of sounds it's

1456
01:13:30,840 --> 01:13:33,960
Speaker 2: obviously very bad, but they work out the effect on

1457
01:13:33,960 --> 01:13:35,919
Speaker 2: the ore price, they work out the effect on the economy,

1458
01:13:35,920 --> 01:13:38,759
Speaker 2: They work out the effect on these things that are occurring.

1459
01:13:38,800 --> 01:13:41,680
Speaker 2: And even with Trump's appointments, the markets have met. Rather

1460
01:13:41,680 --> 01:13:43,920
Speaker 2: that he's appointed this guy's treasury sectuary. Oh, he's actually

1461
01:13:43,920 --> 01:13:46,400
Speaker 2: a bit of a hawk on budget policy. So the

1462
01:13:46,400 --> 01:13:48,280
Speaker 2: bond market rallied on this guy is a bit of

1463
01:13:48,320 --> 01:13:52,400
Speaker 2: a loser. You know. The markets move on information, and

1464
01:13:52,400 --> 01:13:55,479
Speaker 2: if you appoint Bozo the clown to the RBA board

1465
01:13:55,520 --> 01:13:58,080
Speaker 2: and they screw up, the markets will punish you. So

1466
01:13:58,200 --> 01:14:00,720
Speaker 2: I don't think, and I don't think. And or if

1467
01:14:00,760 --> 01:14:03,920
Speaker 2: there's a change of government next year and Angus Taylor's treasurer,

1468
01:14:04,840 --> 01:14:08,439
Speaker 2: I think they'd be there might be a slight bias

1469
01:14:08,479 --> 01:14:11,479
Speaker 2: towards a few people, but it would be very slight,

1470
01:14:11,560 --> 01:14:13,800
Speaker 2: and I don't think it would change what they actually

1471
01:14:13,880 --> 01:14:14,479
Speaker 2: did with rates.

1472
01:14:14,600 --> 01:14:18,840
Speaker 1: The final question, Slater says or asks, that's a good one.

1473
01:14:19,120 --> 01:14:21,120
Speaker 1: What can we expect for Homelann rates and the probably

1474
01:14:21,120 --> 01:14:22,800
Speaker 1: market in twenty twenty five. I think we just.

1475
01:14:22,800 --> 01:14:24,280
Speaker 2: Covered it to have a little bit board we have

1476
01:14:24,360 --> 01:14:26,960
Speaker 2: on rates we have and we didn't mention this just

1477
01:14:27,320 --> 01:14:30,080
Speaker 2: as I came into the studio half an hour an

1478
01:14:30,080 --> 01:14:33,880
Speaker 2: hour ago. There are two and a half so about

1479
01:14:33,880 --> 01:14:37,120
Speaker 2: sixty basis points of rate cuts into the futures market

1480
01:14:37,120 --> 01:14:39,479
Speaker 2: for twenty twenty five. So by the end of twenty

1481
01:14:39,520 --> 01:14:43,240
Speaker 2: twenty five, about sixty basis points, so two twenty fives

1482
01:14:43,320 --> 01:14:46,120
Speaker 2: and about half of another one priced in to the

1483
01:14:46,160 --> 01:14:48,840
Speaker 2: market twenty twenty five, and a little bit more in

1484
01:14:48,880 --> 01:14:52,360
Speaker 2: twenty twenty six. We'll just get twenty twenty five. Probably

1485
01:14:52,479 --> 01:14:55,840
Speaker 2: right as we're saying, is that inflation rate falls, will

1486
01:14:55,840 --> 01:14:58,559
Speaker 2: see a couple of little twinklings from the RBA twenty

1487
01:14:58,600 --> 01:15:00,679
Speaker 2: five twenty five. So I think that's about so two

1488
01:15:01,280 --> 01:15:03,439
Speaker 2: to three or four, you know, obviously depends how quickly

1489
01:15:03,439 --> 01:15:07,840
Speaker 2: that inflation rate falls. Housing, we're actually getting some really

1490
01:15:07,880 --> 01:15:10,920
Speaker 2: interesting things occurring on housing and house prices. In particular,

1491
01:15:12,360 --> 01:15:16,240
Speaker 2: the immigration and the student intake has come off. Mister

1492
01:15:16,320 --> 01:15:19,160
Speaker 2: Dutton's wanting to trim it more is in one of

1493
01:15:19,200 --> 01:15:22,839
Speaker 2: his this is one policy issue having a lower immigration

1494
01:15:22,920 --> 01:15:24,760
Speaker 2: intake than the Labor Party, So that would be really

1495
01:15:24,800 --> 01:15:27,960
Speaker 2: interesting to sort of take pressure off infrastructure, pressure off housing.

1496
01:15:28,479 --> 01:15:31,080
Speaker 2: And we do know that new listings people are selling

1497
01:15:31,120 --> 01:15:33,720
Speaker 2: their house, particularly in regional parts that they might have

1498
01:15:33,760 --> 01:15:36,160
Speaker 2: bought that house, you know, during the pandemic to have

1499
01:15:36,200 --> 01:15:39,679
Speaker 2: that sort of sea change, tree change to the area.

1500
01:15:40,000 --> 01:15:42,439
Speaker 2: They're realizing, holy it, it's expensive to hold his house.

1501
01:15:42,520 --> 01:15:44,559
Speaker 2: Rates have gone up and all the costs have gone up,

1502
01:15:44,800 --> 01:15:46,360
Speaker 2: so there's a bit of an increase in new listings,

1503
01:15:46,400 --> 01:15:51,000
Speaker 2: which is negative for prices. So I think, look, I

1504
01:15:51,000 --> 01:15:52,680
Speaker 2: think price will be brought flat. Don't look, I don't

1505
01:15:52,720 --> 01:15:55,559
Speaker 2: think we're going to crash. It's we've never had a

1506
01:15:55,560 --> 01:15:57,960
Speaker 2: price crash. We've had prices down ten percent that you know,

1507
01:15:58,000 --> 01:16:00,479
Speaker 2: the worst. I don't think we're heading for that. Because

1508
01:16:00,520 --> 01:16:03,240
Speaker 2: as we get through the year, if we do get

1509
01:16:03,280 --> 01:16:07,959
Speaker 2: supply and demand putting slight downward pressure on house prices,

1510
01:16:08,439 --> 01:16:11,240
Speaker 2: if we do start getting rate cuts in May, June, July, whatever,

1511
01:16:12,439 --> 01:16:16,280
Speaker 2: people will be able to recalculate their borrowing capability and

1512
01:16:16,320 --> 01:16:18,880
Speaker 2: put a bit of a floor under the downturn. So

1513
01:16:19,400 --> 01:16:21,000
Speaker 2: of us to sort of say here where all house

1514
01:16:21,040 --> 01:16:22,679
Speaker 2: prices be and isn't I'd say flat.

1515
01:16:22,840 --> 01:16:25,320
Speaker 1: That's what I think too. I think flat plus on.

1516
01:16:25,360 --> 01:16:28,599
Speaker 2: Minus two percent. Yeah, the worst city might be minus

1517
01:16:28,600 --> 01:16:31,679
Speaker 2: five it's probably Melbourne or Hobart or Darwin. The best

1518
01:16:31,680 --> 01:16:34,360
Speaker 2: city which is still probably going to be Adelaide, Perth

1519
01:16:35,040 --> 01:16:38,120
Speaker 2: and maybe Brisbane might be up five percent. But coming

1520
01:16:38,120 --> 01:16:40,559
Speaker 2: off from that incredible boom that we've seen, the lie.

1521
01:16:42,120 --> 01:16:44,800
Speaker 1: And what I would say too is that a good

1522
01:16:44,840 --> 01:16:46,680
Speaker 1: thing is we're not going to I don't expect to

1523
01:16:46,680 --> 01:16:50,200
Speaker 1: see any massive price increases. I don't expect it to

1524
01:16:50,240 --> 01:16:50,840
Speaker 1: be like it was.

1525
01:16:51,000 --> 01:16:53,040
Speaker 2: We want a bit of a consolidation. We've had a

1526
01:16:53,040 --> 01:16:53,439
Speaker 2: good run.

1527
01:16:53,600 --> 01:16:56,679
Speaker 1: Let's slow down. Let's slow down and let first.

1528
01:16:56,439 --> 01:16:58,760
Speaker 2: Time buyers catch up. When you know, buy us catch

1529
01:16:58,840 --> 01:17:00,400
Speaker 2: up to the sort of boom.

1530
01:17:00,640 --> 01:17:04,080
Speaker 1: So cougi in terms of slowing down, Christmas is upon us.

1531
01:17:04,439 --> 01:17:08,719
Speaker 1: Our meeting. Last meeting for the RBAS this week in December,

1532
01:17:09,920 --> 01:17:12,640
Speaker 1: and we won't meet again until you and I will

1533
01:17:12,640 --> 01:17:15,599
Speaker 1: meet again in January, but the RBA won't be meeting again,

1534
01:17:15,640 --> 01:17:17,160
Speaker 1: I think, and to some date in February. Things the

1535
01:17:17,200 --> 01:17:21,519
Speaker 1: sixth of February twenty twenty six. I want to thank

1536
01:17:21,560 --> 01:17:24,000
Speaker 1: you for everything you've done for us. This year has

1537
01:17:24,040 --> 01:17:27,240
Speaker 1: been a really exciting year. Lots of stuff to talk about,

1538
01:17:27,240 --> 01:17:30,519
Speaker 1: like it's been a bit crazy. It's been a bit crazy,

1539
01:17:31,520 --> 01:17:34,360
Speaker 1: but we've done a pretty good job. We've increased our

1540
01:17:34,439 --> 01:17:38,320
Speaker 1: listeners and our people who watch us, and you know,

1541
01:17:38,360 --> 01:17:41,479
Speaker 1: we've actually built something pretty cool. He so thanks very much.

1542
01:17:41,560 --> 01:17:43,360
Speaker 2: Might be a great time, absolute pleasure. As I said before,

1543
01:17:43,400 --> 01:17:45,120
Speaker 2: wouldn't miss it for the world. And it's been a

1544
01:17:45,160 --> 01:17:47,880
Speaker 2: privilege knowing you for it must be twenty five years

1545
01:17:47,880 --> 01:17:48,360
Speaker 2: a long time.

1546
01:17:48,680 --> 01:17:52,120
Speaker 1: Maybe it goes back to nineteen ninety nine.

1547
01:17:52,200 --> 01:17:56,320
Speaker 2: Yeh, we go twenty five year twenty five. So thank you.

1548
01:17:56,680 --> 01:18:01,439
Speaker 2: Love talking about these issues, you know. Yeah, as I said,

1549
01:18:01,479 --> 01:18:04,000
Speaker 2: I love preparing for it and the conversation just flows.

1550
01:18:04,040 --> 01:18:06,080
Speaker 2: You know. We by the way, we don't script this.

1551
01:18:07,479 --> 01:18:10,120
Speaker 2: It's probably obvious to some people. We just ramble on

1552
01:18:10,200 --> 01:18:12,920
Speaker 2: and I think that that's great fun. And yeah, the

1553
01:18:12,920 --> 01:18:16,639
Speaker 2: feedback I've got fantastic, So thanky, Mark and Merry Christmas

1554
01:18:16,680 --> 01:18:19,480
Speaker 2: and hopeful twenty twenty five is a good one for everybody.

1555
01:18:19,160 --> 01:18:24,240
Speaker 1: So do I mate, Thanks very much. See